Correlation Between TRAVEL LEISURE and Orsted AS

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

Diversification Opportunities for TRAVEL LEISURE and Orsted AS

-0.85

Correlation Coefficient

TRAVEL LEISURE  Orsted AS

Pay attention - limited upside

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

Pair Corralation between TRAVEL LEISURE and Orsted AS

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.74 times more return on investment than Orsted AS. However, TRAVEL LEISURE DL 01 is 1.35 times less risky than Orsted AS. It trades about -0.32 of its potential returns per unit of risk. Orsted AS is currently generating about -0.53 per unit of risk. If you would invest  5,199  in TRAVEL LEISURE DL 01 on October 1, 2024 and sell it today you would lose (319.00) from holding TRAVEL LEISURE DL 01 or give up 6.14% of portfolio value over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Orsted AS

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 LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

Orsted AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orsted AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TRAVEL LEISURE and Orsted AS

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

The idea behind TRAVEL LEISURE DL 01 and Orsted AS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.