Correlation Between Litigation Capital and Booking Holdings

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

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

Diversification Opportunities for Litigation Capital and Booking Holdings

-0.11

Correlation Coefficient

Litigation Capital  Booking Holdings

Good diversification

The 3 months correlation between Litigation and Booking is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and Litigation Capital 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 Litigation Capital Management 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 Litigation Capital i.e., Litigation Capital and Booking Holdings go up and down completely randomly.

Pair Corralation between Litigation Capital and Booking Holdings

Assuming the 90 days trading horizon Litigation Capital Management is expected to under-perform the Booking Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Litigation Capital Management is 12.02 times less risky than Booking Holdings. The stock trades about -0.11 of its potential returns per unit of risk. The Booking Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  427,113  in Booking Holdings on October 23, 2024 and sell it today you would earn a total of  65,306  from holding Booking Holdings or generate 15.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Litigation Capital Management  vs.  Booking Holdings

Litigation Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litigation Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Booking Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Booking Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Litigation Capital and Booking Holdings

The main advantage of trading using opposite Litigation Capital and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litigation Capital 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 Litigation Capital Management 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.