Correlation Between TripAdvisor and Lizhan Environmental

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

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

Diversification Opportunities for TripAdvisor and Lizhan Environmental

0.0

Correlation Coefficient

TripAdvisor  Lizhan Environmental

Pay attention - limited upside

The 3 months correlation between TripAdvisor and Lizhan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and Lizhan Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhan Environmental 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 Lizhan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhan Environmental has no effect on the direction of TripAdvisor i.e., TripAdvisor and Lizhan Environmental go up and down completely randomly.

Pair Corralation between TripAdvisor and Lizhan Environmental

If you would invest  1,406  in TripAdvisor on December 23, 2024 and sell it today you would earn a total of  83.00  from holding TripAdvisor or generate 5.9% return on investment over 90 days.

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

TripAdvisor  vs.  Lizhan Environmental

TripAdvisor

Risk-Adjusted Performance

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 April 2025.

Lizhan Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lizhan Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lizhan Environmental is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TripAdvisor and Lizhan Environmental

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

The idea behind TripAdvisor and Lizhan Environmental 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.