Correlation Between TripAdvisor and TUI AG

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

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

Diversification Opportunities for TripAdvisor and TUI AG

0.79

Correlation Coefficient

TripAdvisor  TUI AG

Poor diversification

The 3 months correlation between TripAdvisor and TUI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI AG and TripAdvisor 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 TripAdvisor are associated (or correlated) with TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of TripAdvisor i.e., TripAdvisor and TUI AG go up and down completely randomly.

Pair Corralation between TripAdvisor and TUI AG

Assuming the 90 days horizon TripAdvisor is expected to generate 5.71 times less return on investment than TUI AG. In addition to that, TripAdvisor is 1.3 times more volatile than TUI AG. It trades about 0.03 of its total potential returns per unit of risk. TUI AG is currently generating about 0.2 per unit of volatility. If you would invest  597.00  in TUI AG on September 2, 2024 and sell it today you would earn a total of  154.00  from holding TUI AG or generate 25.8% return on investment over 90 days.

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

TripAdvisor  vs.  TUI AG

TripAdvisor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TripAdvisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TUI AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TUI AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TUI AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TripAdvisor and TUI AG

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

The idea behind TripAdvisor and TUI AG 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.