Correlation Between E Home and Booking Holdings

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

By analyzing existing cross correlation between E Home Household Service and Booking Holdings, you can compare the effects of market volatilities on E Home and Booking Holdings 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 E Home with a short position of Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Home and Booking Holdings.

Diversification Opportunities for E Home and Booking Holdings

-0.81

Correlation Coefficient

E Home  Booking Holdings

Pay attention - limited upside

The 3 months correlation between EJH and Booking is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and E Home 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 E Home Household Service are associated (or correlated) with Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of E Home i.e., E Home and Booking Holdings go up and down completely randomly.

Pair Corralation between E Home and Booking Holdings

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the Booking Holdings. In addition to that, E Home is 4.73 times more volatile than Booking Holdings. It trades about -0.02 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.39 per unit of volatility. If you would invest  380,496  in Booking Holdings on September 1, 2024 and sell it today you would earn a total of  139,702  from holding Booking Holdings or generate 36.72% return on investment over 90 days.

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

E Home Household Service  vs.  Booking Holdings

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Booking Holdings

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Booking Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Home and Booking Holdings

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

The idea behind E Home Household Service and Booking Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.