Correlation Between TRAVEL + and BG Foods

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

Diversification Opportunities for TRAVEL + and BG Foods

-0.76

Correlation Coefficient

TRAVEL +  BG Foods

Pay attention - limited upside

The 3 months correlation between TRAVEL and DHR is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of TRAVEL + i.e., TRAVEL + and BG Foods go up and down completely randomly.

Pair Corralation between TRAVEL + and BG Foods

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.65 times more return on investment than BG Foods. However, TRAVEL LEISURE DL 01 is 1.54 times less risky than BG Foods. It trades about 0.05 of its potential returns per unit of risk. BG Foods is currently generating about -0.02 per unit of risk. If you would invest  3,360  in TRAVEL LEISURE DL 01 on October 10, 2024 and sell it today you would earn a total of  1,460  from holding TRAVEL LEISURE DL 01 or generate 43.45% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  BG Foods

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 uncertain basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BG Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TRAVEL + and BG Foods

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

The idea behind TRAVEL LEISURE DL 01 and BG Foods 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.