Correlation Between TRAVEL + and Japan Asia

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

Diversification Opportunities for TRAVEL + and Japan Asia

0.34

Correlation Coefficient

TRAVEL +  Japan Asia

Weak diversification

The 3 months correlation between TRAVEL and Japan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment 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 Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of TRAVEL + i.e., TRAVEL + and Japan Asia go up and down completely randomly.

Pair Corralation between TRAVEL + and Japan Asia

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.51 times more return on investment than Japan Asia. However, TRAVEL LEISURE DL 01 is 1.96 times less risky than Japan Asia. It trades about 0.08 of its potential returns per unit of risk. Japan Asia Investment is currently generating about 0.0 per unit of risk. If you would invest  3,372  in TRAVEL LEISURE DL 01 on October 5, 2024 and sell it today you would earn a total of  1,448  from holding TRAVEL LEISURE DL 01 or generate 42.94% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Japan Asia Investment

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia 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 Japan Asia

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

The idea behind TRAVEL LEISURE DL 01 and Japan Asia Investment 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.