Correlation Between TRAVEL + and GMO Internet

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

Diversification Opportunities for TRAVEL + and GMO Internet

0.7

Correlation Coefficient

TRAVEL +  GMO Internet

Poor diversification

The 3 months correlation between TRAVEL and GMO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of TRAVEL + i.e., TRAVEL + and GMO Internet go up and down completely randomly.

Pair Corralation between TRAVEL + and GMO Internet

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.05 times more return on investment than GMO Internet. However, TRAVEL + is 1.05 times more volatile than GMO Internet. It trades about 0.18 of its potential returns per unit of risk. GMO Internet is currently generating about 0.06 per unit of risk. If you would invest  4,080  in TRAVEL LEISURE DL 01 on October 1, 2024 and sell it today you would earn a total of  800.00  from holding TRAVEL LEISURE DL 01 or generate 19.61% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  GMO Internet

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

GMO Internet

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL + and GMO Internet

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

The idea behind TRAVEL LEISURE DL 01 and GMO Internet 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.