Correlation Between Expedia and Sabre

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

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

Diversification Opportunities for Expedia and Sabre

0.0

Correlation Coefficient

Expedia  Sabre

Pay attention - limited upside

The 3 months correlation between Expedia and Sabre is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Sabre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre 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 Sabre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre has no effect on the direction of Expedia i.e., Expedia and Sabre go up and down completely randomly.

Pair Corralation between Expedia and Sabre

Given the investment horizon of 90 days Expedia Group is expected to generate 0.61 times more return on investment than Sabre. However, Expedia Group is 1.63 times less risky than Sabre. It trades about 0.06 of its potential returns per unit of risk. Sabre is currently generating about -0.08 per unit of risk. If you would invest  11,135  in Expedia Group on October 3, 2024 and sell it today you would earn a total of  7,498  from holding Expedia Group or generate 67.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.37%
Values	Daily Returns

Expedia Group  vs.  Sabre

Expedia Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Expedia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sabre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sabre is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Expedia and Sabre

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

The idea behind Expedia Group and Sabre 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.