Correlation Between E Home and Despegar Corp

Can any of the company-specific risk be diversified away by investing in both E Home and Despegar 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 E Home and Despegar Corp 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 Despegar Corp, you can compare the effects of market volatilities on E Home and Despegar 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 E Home with a short position of Despegar Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Home and Despegar Corp.

Diversification Opportunities for E Home and Despegar Corp

-0.18

Correlation Coefficient

E Home  Despegar Corp

Good diversification

The 3 months correlation between EJH and Despegar is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp 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 Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of E Home i.e., E Home and Despegar Corp go up and down completely randomly.

Pair Corralation between E Home and Despegar Corp

Considering the 90-day investment horizon E Home Household Service is expected to generate 49.55 times more return on investment than Despegar Corp. However, E Home is 49.55 times more volatile than Despegar Corp. It trades about 0.14 of its potential returns per unit of risk. Despegar Corp is currently generating about -0.06 per unit of risk. If you would invest  64.00  in E Home Household Service on December 28, 2024 and sell it today you would earn a total of  50.00  from holding E Home Household Service or generate 78.12% return on investment over 90 days.

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

E Home Household Service  vs.  Despegar Corp

E Home Household

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E Home Household Service are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward-looking indicators, E Home demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with E Home and Despegar Corp

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

The idea behind E Home Household Service and Despegar 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.