Correlation Between Expedia and USWE SPORTS

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

By analyzing existing cross correlation between Expedia Group and USWE SPORTS AB, you can compare the effects of market volatilities on Expedia and USWE SPORTS 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 Expedia with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and USWE SPORTS.

Diversification Opportunities for Expedia and USWE SPORTS

0.9

Correlation Coefficient

Expedia  USWE SPORTS

Almost no diversification

The 3 months correlation between Expedia and USWE is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and Expedia 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 Expedia Group are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of Expedia i.e., Expedia and USWE SPORTS go up and down completely randomly.

Pair Corralation between Expedia and USWE SPORTS

Assuming the 90 days trading horizon Expedia Group is expected to generate 0.69 times more return on investment than USWE SPORTS. However, Expedia Group is 1.44 times less risky than USWE SPORTS. It trades about 0.15 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about -0.04 per unit of risk. If you would invest  11,588  in Expedia Group on September 26, 2024 and sell it today you would earn a total of  6,064  from holding Expedia Group or generate 52.33% return on investment over 90 days.

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

Expedia Group  vs.  USWE SPORTS AB

Expedia Group

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Expedia reported solid returns over the last few months and may actually be approaching a breakup point.

USWE SPORTS AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Expedia and USWE SPORTS

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

The idea behind Expedia Group and USWE SPORTS AB 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.