Correlation Between TRAVEL LEISURE and Event Hospitality

Can any of the company-specific risk be diversified away by investing in both TRAVEL LEISURE and Event 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 TRAVEL LEISURE and Event Hospitality 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 Event Hospitality and, you can compare the effects of market volatilities on TRAVEL LEISURE and Event 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 TRAVEL LEISURE with a short position of Event Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and Event Hospitality.

Diversification Opportunities for TRAVEL LEISURE and Event Hospitality

0.85

Correlation Coefficient

TRAVEL LEISURE  Event Hospitality

Very poor diversification

The 3 months correlation between TRAVEL and Event is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Event Hospitality and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Event Hospitality 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 Event Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Event Hospitality has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and Event Hospitality go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and Event Hospitality

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.95 times more return on investment than Event Hospitality. However, TRAVEL LEISURE DL 01 is 1.05 times less risky than Event Hospitality. It trades about -0.08 of its potential returns per unit of risk. Event Hospitality and is currently generating about -0.08 per unit of risk. If you would invest  4,951  in TRAVEL LEISURE DL 01 on September 22, 2024 and sell it today you would lose (131.00) from holding TRAVEL LEISURE DL 01 or give up 2.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

TRAVEL LEISURE DL 01  vs.  Event Hospitality and

TRAVEL LEISURE DL

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 15 (%) 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.

Event Hospitality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Event Hospitality is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TRAVEL LEISURE and Event Hospitality

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

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