Correlation Between Despegar Corp and Tuniu Corp

Can any of the company-specific risk be diversified away by investing in both Despegar Corp and Tuniu Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Despegar Corp and Tuniu Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Despegar Corp and Tuniu Corp, you can compare the effects of market volatilities on Despegar Corp and Tuniu Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Despegar Corp with a short position of Tuniu Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Despegar Corp and Tuniu Corp.

Diversification Opportunities for Despegar Corp and Tuniu Corp

0.07

Correlation Coefficient

Despegar Corp  Tuniu Corp

Significant diversification

The 3 months correlation between Despegar and Tuniu is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Despegar Corp and Tuniu Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tuniu Corp and Despegar Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Despegar Corp are associated (or correlated) with Tuniu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tuniu Corp has no effect on the direction of Despegar Corp i.e., Despegar Corp and Tuniu Corp go up and down completely randomly.

Pair Corralation between Despegar Corp and Tuniu Corp

Given the investment horizon of 90 days Despegar Corp is expected to under-perform the Tuniu Corp. But the stock apears to be less risky and, when comparing its historical volatility, Despegar Corp is 5.46 times less risky than Tuniu Corp. The stock trades about -0.14 of its potential returns per unit of risk. The Tuniu Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  93.00  in Tuniu Corp on December 29, 2024 and sell it today you would earn a total of  15.00  from holding Tuniu Corp or generate 16.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Despegar Corp  vs.  Tuniu Corp

Despegar Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Despegar Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Despegar Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Tuniu Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tuniu Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tuniu Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Despegar Corp and Tuniu Corp

The main advantage of trading using opposite Despegar Corp and Tuniu Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Despegar Corp position performs unexpectedly, Tuniu Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tuniu Corp will offset losses from the drop in Tuniu Corp's long position.

The idea behind Despegar Corp and Tuniu Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.