Correlation Between Trip Group and Tuniu Corp

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

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

Diversification Opportunities for Trip Group and Tuniu Corp

0.8

Correlation Coefficient

Trip Group  Tuniu Corp

Very poor diversification

The 3 months correlation between Trip and Tuniu is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Ltd and Tuniu Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tuniu Corp and Trip Group 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 Trip Group Ltd are associated (or correlated) with Tuniu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tuniu Corp has no effect on the direction of Trip Group i.e., Trip Group and Tuniu Corp go up and down completely randomly.

Pair Corralation between Trip Group and Tuniu Corp

Given the investment horizon of 90 days Trip Group is expected to generate 1.27 times less return on investment than Tuniu Corp. But when comparing it to its historical volatility, Trip Group Ltd is 1.84 times less risky than Tuniu Corp. It trades about 0.16 of its potential returns per unit of risk. Tuniu Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Tuniu Corp on September 1, 2024 and sell it today you would earn a total of  32.00  from holding Tuniu Corp or generate 39.02% return on investment over 90 days.

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

Trip Group Ltd  vs.  Tuniu Corp

Trip Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trip Group Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Trip Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Tuniu Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tuniu Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tuniu Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trip Group and Tuniu Corp

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

The idea behind Trip Group Ltd and Tuniu Corp 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.