Correlation Between Gray Television and Travelzoo

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

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

Diversification Opportunities for Gray Television and Travelzoo

-0.43

Correlation Coefficient

Gray Television  Travelzoo

Very good diversification

The 3 months correlation between Gray and Travelzoo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gray Television and Travelzoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travelzoo and Gray Television 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 Gray Television are associated (or correlated) with Travelzoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travelzoo has no effect on the direction of Gray Television i.e., Gray Television and Travelzoo go up and down completely randomly.

Pair Corralation between Gray Television and Travelzoo

Considering the 90-day investment horizon Gray Television is expected to generate 0.8 times more return on investment than Travelzoo. However, Gray Television is 1.26 times less risky than Travelzoo. It trades about 0.26 of its potential returns per unit of risk. Travelzoo is currently generating about -0.1 per unit of risk. If you would invest  293.00  in Gray Television on December 20, 2024 and sell it today you would earn a total of  226.00  from holding Gray Television or generate 77.13% return on investment over 90 days.

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

Gray Television  vs.  Travelzoo

Gray Television

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gray Television are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gray Television displayed solid returns over the last few months and may actually be approaching a breakup point.

Travelzoo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Travelzoo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gray Television and Travelzoo

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

The idea behind Gray Television and Travelzoo 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.