Correlation Between Expedia and HR Block

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

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

Diversification Opportunities for Expedia and HR Block

-0.07

Correlation Coefficient

Expedia  HR Block

Good diversification

The 3 months correlation between Expedia and HRB is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and HR Block in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HR Block 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 HR Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HR Block has no effect on the direction of Expedia i.e., Expedia and HR Block go up and down completely randomly.

Pair Corralation between Expedia and HR Block

Given the investment horizon of 90 days Expedia Group is expected to under-perform the HR Block. In addition to that, Expedia is 1.71 times more volatile than HR Block. It trades about -0.02 of its total potential returns per unit of risk. HR Block is currently generating about 0.03 per unit of volatility. If you would invest  5,306  in HR Block on December 27, 2024 and sell it today you would earn a total of  101.00  from holding HR Block or generate 1.9% return on investment over 90 days.

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

Expedia Group  vs.  HR Block

Expedia Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Expedia Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Expedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

HR Block

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HR Block are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HR Block is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Expedia and HR Block

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

The idea behind Expedia Group and HR Block 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .