Correlation Between Despegar Corp and TUI AG

Can any of the company-specific risk be diversified away by investing in both Despegar Corp and TUI AG 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 TUI AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Despegar Corp and TUI AG, you can compare the effects of market volatilities on Despegar Corp and TUI AG 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 TUI AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Despegar Corp and TUI AG.

Diversification Opportunities for Despegar Corp and TUI AG

0.03

Correlation Coefficient

Despegar Corp  TUI AG

Significant diversification

The 3 months correlation between Despegar and TUI is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Despegar Corp and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI AG 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 TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of Despegar Corp i.e., Despegar Corp and TUI AG go up and down completely randomly.

Pair Corralation between Despegar Corp and TUI AG

Given the investment horizon of 90 days Despegar Corp is expected to generate 2.33 times more return on investment than TUI AG. However, Despegar Corp is 2.33 times more volatile than TUI AG. It trades about 0.12 of its potential returns per unit of risk. TUI AG is currently generating about -0.25 per unit of risk. If you would invest  1,472  in Despegar Corp on December 19, 2024 and sell it today you would earn a total of  450.00  from holding Despegar Corp or generate 30.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Despegar Corp  vs.  TUI AG

Despegar Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

TUI AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days TUI AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Despegar Corp and TUI AG

The main advantage of trading using opposite Despegar Corp and TUI AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Despegar Corp position performs unexpectedly, TUI AG 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 TUI AG will offset losses from the drop in TUI AG's long position.

The idea behind Despegar Corp and TUI AG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.