Correlation Between TripAdvisor and GreenTree Hospitality

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

By analyzing existing cross correlation between TripAdvisor and GreenTree Hospitality Group, you can compare the effects of market volatilities on TripAdvisor and GreenTree Hospitality 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 GreenTree Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of TripAdvisor and GreenTree Hospitality.

Diversification Opportunities for TripAdvisor and GreenTree Hospitality

0.41

Correlation Coefficient

TripAdvisor  GreenTree Hospitality

Very weak diversification

The 3 months correlation between TripAdvisor and GreenTree is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and GreenTree Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenTree Hospitality 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 GreenTree Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenTree Hospitality has no effect on the direction of TripAdvisor i.e., TripAdvisor and GreenTree Hospitality go up and down completely randomly.

Pair Corralation between TripAdvisor and GreenTree Hospitality

Given the investment horizon of 90 days TripAdvisor is expected to generate 0.93 times more return on investment than GreenTree Hospitality. However, TripAdvisor is 1.08 times less risky than GreenTree Hospitality. It trades about -0.01 of its potential returns per unit of risk. GreenTree Hospitality Group is currently generating about -0.01 per unit of risk. If you would invest  2,169  in TripAdvisor on October 7, 2024 and sell it today you would lose (670.00) from holding TripAdvisor or give up 30.89% of portfolio value over 90 days.

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

TripAdvisor  vs.  GreenTree Hospitality Group

TripAdvisor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward indicators, TripAdvisor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GreenTree Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenTree Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical 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.

Pair Trading with TripAdvisor and GreenTree Hospitality

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

The idea behind TripAdvisor and GreenTree Hospitality 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.