Correlation Between Travel Leisure and Amadeus IT

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

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

Diversification Opportunities for Travel Leisure and Amadeus IT

-0.16

Correlation Coefficient

Travel Leisure  Amadeus IT

Good diversification

The 3 months correlation between Travel and Amadeus is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and Amadeus IT Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amadeus IT Holding and Travel Leisure 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 Travel Leisure Co are associated (or correlated) with Amadeus IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amadeus IT Holding has no effect on the direction of Travel Leisure i.e., Travel Leisure and Amadeus IT go up and down completely randomly.

Pair Corralation between Travel Leisure and Amadeus IT

Considering the 90-day investment horizon Travel Leisure Co is expected to under-perform the Amadeus IT. In addition to that, Travel Leisure is 1.27 times more volatile than Amadeus IT Holding. It trades about -0.03 of its total potential returns per unit of risk. Amadeus IT Holding is currently generating about 0.15 per unit of volatility. If you would invest  7,018  in Amadeus IT Holding on December 29, 2024 and sell it today you would earn a total of  975.00  from holding Amadeus IT Holding or generate 13.89% return on investment over 90 days.

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

Travel Leisure Co  vs.  Amadeus IT Holding

Travel Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Travel Leisure Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Travel Leisure is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Amadeus IT Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amadeus IT Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Amadeus IT showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travel Leisure and Amadeus IT

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

The idea behind Travel Leisure Co and Amadeus IT Holding 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.