Correlation Between HR Block and Booking Holdings

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

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

Diversification Opportunities for HR Block and Booking Holdings

0.05

Correlation Coefficient

HR Block  Booking Holdings

Significant diversification

The 3 months correlation between HRB and Booking is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding HR Block and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and HR Block 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 HR Block are associated (or correlated) with Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of HR Block i.e., HR Block and Booking Holdings go up and down completely randomly.

Pair Corralation between HR Block and Booking Holdings

Considering the 90-day investment horizon HR Block is expected to generate 0.98 times more return on investment than Booking Holdings. However, HR Block is 1.02 times less risky than Booking Holdings. It trades about 0.03 of its potential returns per unit of risk. Booking Holdings is currently generating about -0.04 per unit of risk. 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HR Block  vs.  Booking Holdings

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.

Booking Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booking Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Booking Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HR Block and Booking Holdings

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

The idea behind HR Block and Booking Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.