Correlation Between TRAVEL LEISURE and KUAISHOU TECHNOLOGY

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and KUAISHOU TECHNOLOGY CLB, you can compare the effects of market volatilities on TRAVEL LEISURE and KUAISHOU TECHNOLOGY 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 KUAISHOU TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and KUAISHOU TECHNOLOGY.

Diversification Opportunities for TRAVEL LEISURE and KUAISHOU TECHNOLOGY

0.06

Correlation Coefficient

TRAVEL LEISURE  KUAISHOU TECHNOLOGY

Significant diversification

The 3 months correlation between TRAVEL and KUAISHOU is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and KUAISHOU TECHNOLOGY CLB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KUAISHOU TECHNOLOGY CLB 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 DL 01 are associated (or correlated) with KUAISHOU TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KUAISHOU TECHNOLOGY CLB has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and KUAISHOU TECHNOLOGY go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and KUAISHOU TECHNOLOGY

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.57 times more return on investment than KUAISHOU TECHNOLOGY. However, TRAVEL LEISURE DL 01 is 1.76 times less risky than KUAISHOU TECHNOLOGY. It trades about 0.06 of its potential returns per unit of risk. KUAISHOU TECHNOLOGY CLB is currently generating about -0.03 per unit of risk. If you would invest  4,113  in TRAVEL LEISURE DL 01 on September 24, 2024 and sell it today you would earn a total of  787.00  from holding TRAVEL LEISURE DL 01 or generate 19.13% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  KUAISHOU TECHNOLOGY CLB

TRAVEL LEISURE DL

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

KUAISHOU TECHNOLOGY CLB

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KUAISHOU TECHNOLOGY CLB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KUAISHOU TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TRAVEL LEISURE and KUAISHOU TECHNOLOGY

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

The idea behind TRAVEL LEISURE DL 01 and KUAISHOU TECHNOLOGY CLB 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.