Correlation Between TRAVEL + and INSURANCE AUST

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

Diversification Opportunities for TRAVEL + and INSURANCE AUST

0.41

Correlation Coefficient

TRAVEL +  INSURANCE AUST

Very weak diversification

The 3 months correlation between TRAVEL and INSURANCE is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of TRAVEL + i.e., TRAVEL + and INSURANCE AUST go up and down completely randomly.

Pair Corralation between TRAVEL + and INSURANCE AUST

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.86 times more return on investment than INSURANCE AUST. However, TRAVEL LEISURE DL 01 is 1.16 times less risky than INSURANCE AUST. It trades about -0.07 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about -0.07 per unit of risk. If you would invest  4,802  in TRAVEL LEISURE DL 01 on December 22, 2024 and sell it today you would lose (422.00) from holding TRAVEL LEISURE DL 01 or give up 8.79% of portfolio value over 90 days.

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

TRAVEL LEISURE DL 01  vs.  INSURANCE AUST GRP

TRAVEL LEISURE DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with TRAVEL + and INSURANCE AUST

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

The idea behind TRAVEL LEISURE DL 01 and INSURANCE AUST GRP 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.