Correlation Between Software Acquisition and Travelzoo

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

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

Diversification Opportunities for Software Acquisition and Travelzoo

-0.22

Correlation Coefficient

Software Acquisition  Travelzoo

Very good diversification

The 3 months correlation between Software and Travelzoo is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Software Acquisition Group and Travelzoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travelzoo and Software Acquisition 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 Software Acquisition Group 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 Software Acquisition i.e., Software Acquisition and Travelzoo go up and down completely randomly.

Pair Corralation between Software Acquisition and Travelzoo

Given the investment horizon of 90 days Software Acquisition Group is expected to under-perform the Travelzoo. But the stock apears to be less risky and, when comparing its historical volatility, Software Acquisition Group is 1.37 times less risky than Travelzoo. The stock trades about -0.22 of its potential returns per unit of risk. The Travelzoo is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,738  in Travelzoo on October 7, 2024 and sell it today you would earn a total of  375.00  from holding Travelzoo or generate 21.58% return on investment over 90 days.

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

Software Acquisition Group  vs.  Travelzoo

Software Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Software Acquisition Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Travelzoo

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Travelzoo are ranked lower than 19 (%) 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 Software Acquisition and Travelzoo

The main advantage of trading using opposite Software Acquisition and Travelzoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Acquisition 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 Software Acquisition Group 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.