Correlation Between Emerge Commerce and TripAdvisor

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

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

Diversification Opportunities for Emerge Commerce and TripAdvisor

-0.74

Correlation Coefficient

Emerge Commerce  TripAdvisor

Pay attention - limited upside

The 3 months correlation between Emerge and TripAdvisor is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Emerge Commerce and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor and Emerge Commerce 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 Emerge Commerce are associated (or correlated) with TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of Emerge Commerce i.e., Emerge Commerce and TripAdvisor go up and down completely randomly.

Pair Corralation between Emerge Commerce and TripAdvisor

Assuming the 90 days horizon Emerge Commerce is expected to generate 31.63 times more return on investment than TripAdvisor. However, Emerge Commerce is 31.63 times more volatile than TripAdvisor. It trades about 0.08 of its potential returns per unit of risk. TripAdvisor is currently generating about -0.04 per unit of risk. If you would invest  5.00  in Emerge Commerce on September 26, 2024 and sell it today you would lose (2.49) from holding Emerge Commerce or give up 49.8% of portfolio value over 90 days.

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

Emerge Commerce  vs.  TripAdvisor

Emerge Commerce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerge Commerce are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Emerge Commerce reported solid returns over the last few months and may actually be approaching a breakup point.

TripAdvisor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TripAdvisor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, TripAdvisor 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 Emerge Commerce and TripAdvisor

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

The idea behind Emerge Commerce and TripAdvisor 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.