Correlation Between TRAVEL + and TRIPCOM GROUP

Can any of the company-specific risk be diversified away by investing in both TRAVEL + and TRIPCOM GROUP 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 + and TRIPCOM GROUP 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 TRIPCOM GROUP DL 00125, you can compare the effects of market volatilities on TRAVEL + and TRIPCOM GROUP 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 + with a short position of TRIPCOM GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and TRIPCOM GROUP.

Diversification Opportunities for TRAVEL + and TRIPCOM GROUP

0.62

Correlation Coefficient

TRAVEL +  TRIPCOM GROUP

Poor diversification

The 3 months correlation between TRAVEL and TRIPCOM is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and TRIPCOM GROUP DL 00125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRIPCOM GROUP DL and TRAVEL + 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 TRIPCOM GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRIPCOM GROUP DL has no effect on the direction of TRAVEL + i.e., TRAVEL + and TRIPCOM GROUP go up and down completely randomly.

Pair Corralation between TRAVEL + and TRIPCOM GROUP

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to under-perform the TRIPCOM GROUP. But the stock apears to be less risky and, when comparing its historical volatility, TRAVEL LEISURE DL 01 is 3.97 times less risky than TRIPCOM GROUP. The stock trades about -0.38 of its potential returns per unit of risk. The TRIPCOM GROUP DL 00125 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,198  in TRIPCOM GROUP DL 00125 on October 4, 2024 and sell it today you would lose (52.00) from holding TRIPCOM GROUP DL 00125 or give up 0.84% of portfolio value over 90 days.

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

TRAVEL LEISURE DL 01  vs.  TRIPCOM GROUP DL 00125

TRAVEL LEISURE DL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 13 (%) 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.

TRIPCOM GROUP DL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRIPCOM GROUP DL 00125 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRIPCOM GROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TRAVEL + and TRIPCOM GROUP

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

The idea behind TRAVEL LEISURE DL 01 and TRIPCOM GROUP DL 00125 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.