Correlation Between US Foods and TRAVEL +

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

By analyzing existing cross correlation between US Foods Holding and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on US Foods and TRAVEL + 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 US Foods with a short position of TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Foods and TRAVEL +.

Diversification Opportunities for US Foods and TRAVEL +

0.95

Correlation Coefficient

US Foods  TRAVEL +

Almost no diversification

The 3 months correlation between UFH and TRAVEL is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL and US Foods 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 US Foods Holding are associated (or correlated) with TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of US Foods i.e., US Foods and TRAVEL + go up and down completely randomly.

Pair Corralation between US Foods and TRAVEL +

Assuming the 90 days trading horizon US Foods is expected to generate 1.04 times less return on investment than TRAVEL +. But when comparing it to its historical volatility, US Foods Holding is 1.11 times less risky than TRAVEL +. It trades about 0.19 of its potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,119  in TRAVEL LEISURE DL 01 on October 8, 2024 and sell it today you would earn a total of  721.00  from holding TRAVEL LEISURE DL 01 or generate 17.5% return on investment over 90 days.

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

US Foods Holding  vs.  TRAVEL LEISURE DL 01

US Foods Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, US Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

TRAVEL LEISURE DL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Foods and TRAVEL +

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

The idea behind US Foods Holding and TRAVEL LEISURE DL 01 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.