Correlation Between TRAVEL LEISURE and Nucor

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

Diversification Opportunities for TRAVEL LEISURE and Nucor

-0.07

Correlation Coefficient

TRAVEL LEISURE  Nucor

Good diversification

The 3 months correlation between TRAVEL and Nucor is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and Nucor go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and Nucor

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.41 times more return on investment than Nucor. However, TRAVEL LEISURE DL 01 is 2.42 times less risky than Nucor. It trades about 0.18 of its potential returns per unit of risk. Nucor is currently generating about -0.02 per unit of risk. If you would invest  4,317  in TRAVEL LEISURE DL 01 on October 25, 2024 and sell it today you would earn a total of  683.00  from holding TRAVEL LEISURE DL 01 or generate 15.82% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Nucor

TRAVEL LEISURE DL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nucor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL LEISURE and Nucor

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

The idea behind TRAVEL LEISURE DL 01 and Nucor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.