Correlation Between Basic Materials and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Booking Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Booking Holdings, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Booking Holdings.
Diversification Opportunities for Basic Materials and Booking Holdings
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and Booking is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Booking Holdings go up and down completely randomly.
Pair Corralation between Basic Materials and Booking Holdings
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Booking Holdings. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.65 times less risky than Booking Holdings. The index trades about 0.0 of its potential returns per unit of risk. The Booking Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,153 in Booking Holdings on September 23, 2024 and sell it today you would earn a total of 10,976 from holding Booking Holdings or generate 178.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.2% |
Values | Daily Returns |
Basic Materials vs. Booking Holdings
Performance |
Timeline |
Basic Materials and Booking Holdings Volatility Contrast
Predicted Return Density |
Returns |
Basic Materials
Pair trading matchups for Basic Materials
Booking Holdings
Pair trading matchups for Booking Holdings
Pair Trading with Basic Materials and Booking Holdings
The main advantage of trading using opposite Basic Materials and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.Basic Materials vs. American Airlines Group | Basic Materials vs. Paycom Software | Basic Materials vs. Taiwan Semiconductor Manufacturing | Basic Materials vs. United Airlines Holdings |
Booking Holdings vs. Royal Caribbean Cruises | Booking Holdings vs. Expedia Group | Booking Holdings vs. Carnival plc | Booking Holdings vs. Norwegian Cruise Line |
Check out your portfolio center.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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