Correlation Between Magnite and Travelzoo

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

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

Diversification Opportunities for Magnite and Travelzoo

0.84

Correlation Coefficient

Magnite  Travelzoo

Very poor diversification

The 3 months correlation between Magnite and Travelzoo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and Travelzoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travelzoo and Magnite 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 Magnite are associated (or correlated) with Travelzoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travelzoo has no effect on the direction of Magnite i.e., Magnite and Travelzoo go up and down completely randomly.

Pair Corralation between Magnite and Travelzoo

Given the investment horizon of 90 days Magnite is expected to generate 1.27 times less return on investment than Travelzoo. But when comparing it to its historical volatility, Magnite is 1.07 times less risky than Travelzoo. It trades about 0.12 of its potential returns per unit of risk. Travelzoo is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,462  in Travelzoo on September 12, 2024 and sell it today you would earn a total of  476.00  from holding Travelzoo or generate 32.56% return on investment over 90 days.

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

Magnite  vs.  Travelzoo

Magnite

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Travelzoo

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Travelzoo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Travelzoo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnite and Travelzoo

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

The idea behind Magnite and Travelzoo 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.