Correlation Between Highlight Communications and Expedia

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

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

Diversification Opportunities for Highlight Communications and Expedia

0.18

Correlation Coefficient

Highlight Communications  Expedia

Average diversification

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

Pair Corralation between Highlight Communications and Expedia

Assuming the 90 days trading horizon Highlight Communications is expected to generate 5.63 times less return on investment than Expedia. In addition to that, Highlight Communications is 1.57 times more volatile than Expedia Group. It trades about 0.03 of its total potential returns per unit of risk. Expedia Group is currently generating about 0.25 per unit of volatility. If you would invest  12,308  in Expedia Group on September 18, 2024 and sell it today you would earn a total of  4,980  from holding Expedia Group or generate 40.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Highlight Communications AG  vs.  Expedia Group

Highlight Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Highlight Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Expedia Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Expedia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highlight Communications and Expedia

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

The idea behind Highlight Communications AG and Expedia Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.