Correlation Between Expedia and Yamaha

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

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

Diversification Opportunities for Expedia and Yamaha

-0.83

Correlation Coefficient

Expedia  Yamaha

Pay attention - limited upside

The 3 months correlation between Expedia and Yamaha is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Expedia i.e., Expedia and Yamaha go up and down completely randomly.

Pair Corralation between Expedia and Yamaha

Assuming the 90 days trading horizon Expedia Group is expected to generate 0.79 times more return on investment than Yamaha. However, Expedia Group is 1.26 times less risky than Yamaha. It trades about 0.3 of its potential returns per unit of risk. Yamaha is currently generating about -0.05 per unit of risk. If you would invest  12,132  in Expedia Group on September 14, 2024 and sell it today you would earn a total of  5,908  from holding Expedia Group or generate 48.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Expedia Group  vs.  Yamaha

Expedia Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Expedia reported solid returns over the last few months and may actually be approaching a breakup point.

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Expedia and Yamaha

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

The idea behind Expedia Group and Yamaha 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.