Correlation Between International Consolidated and TRAVEL +

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

By analyzing existing cross correlation between International Consolidated Airlines and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on International Consolidated and TRAVEL + 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 International Consolidated with a short position of TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and TRAVEL +.

Diversification Opportunities for International Consolidated and TRAVEL +

0.88

Correlation Coefficient

International Consolidated  TRAVEL +

Very poor diversification

The 3 months correlation between International and TRAVEL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of International Consolidated i.e., International Consolidated and TRAVEL + go up and down completely randomly.

Pair Corralation between International Consolidated and TRAVEL +

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.34 times more return on investment than TRAVEL +. However, International Consolidated is 1.34 times more volatile than TRAVEL LEISURE DL 01. It trades about -0.02 of its potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about -0.07 per unit of risk. If you would invest  362.00  in International Consolidated Airlines on December 24, 2024 and sell it today you would lose (20.00) from holding International Consolidated Airlines or give up 5.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

International Consolidated Air  vs.  TRAVEL LEISURE DL 01

International Consolidated

Risk-Adjusted Performance

Very Weak

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

TRAVEL LEISURE DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with International Consolidated and TRAVEL +

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

The idea behind International Consolidated Airlines and TRAVEL LEISURE DL 01 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.