Correlation Between TripAdvisor and Hyatt Hotels

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

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

Diversification Opportunities for TripAdvisor and Hyatt Hotels

-0.25

Correlation Coefficient

TripAdvisor  Hyatt Hotels

Very good diversification

The 3 months correlation between TripAdvisor and Hyatt is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of TripAdvisor i.e., TripAdvisor and Hyatt Hotels go up and down completely randomly.

Pair Corralation between TripAdvisor and Hyatt Hotels

Given the investment horizon of 90 days TripAdvisor is expected to under-perform the Hyatt Hotels. In addition to that, TripAdvisor is 1.58 times more volatile than Hyatt Hotels. It trades about 0.0 of its total potential returns per unit of risk. Hyatt Hotels is currently generating about 0.07 per unit of volatility. If you would invest  8,929  in Hyatt Hotels on September 16, 2024 and sell it today you would earn a total of  6,970  from holding Hyatt Hotels or generate 78.06% return on investment over 90 days.

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

TripAdvisor  vs.  Hyatt Hotels

TripAdvisor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, TripAdvisor is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Hyatt Hotels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hyatt Hotels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Hyatt Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TripAdvisor and Hyatt Hotels

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

The idea behind TripAdvisor and Hyatt Hotels 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.