Correlation Between Travel Leisure and Expedia

Can any of the company-specific risk be diversified away by investing in both Travel Leisure and Expedia 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 Expedia 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 Expedia Group, you can compare the effects of market volatilities on Travel Leisure and Expedia 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 Expedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travel Leisure and Expedia.

Diversification Opportunities for Travel Leisure and Expedia

0.61

Correlation Coefficient

Travel Leisure  Expedia

Poor diversification

The 3 months correlation between Travel and Expedia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group 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 Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of Travel Leisure i.e., Travel Leisure and Expedia go up and down completely randomly.

Pair Corralation between Travel Leisure and Expedia

Considering the 90-day investment horizon Travel Leisure Co is expected to generate 0.64 times more return on investment than Expedia. However, Travel Leisure Co is 1.56 times less risky than Expedia. It trades about -0.05 of its potential returns per unit of risk. Expedia Group is currently generating about -0.04 per unit of risk. If you would invest  4,946  in Travel Leisure Co on December 28, 2024 and sell it today you would lose (333.00) from holding Travel Leisure Co or give up 6.73% of portfolio value over 90 days.

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

Travel Leisure Co  vs.  Expedia Group

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.

Expedia Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Expedia Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Travel Leisure and Expedia

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

The idea behind Travel Leisure Co and Expedia Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.