Correlation Between TRAVEL + and Société Générale

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

Diversification Opportunities for TRAVEL + and Société Générale

-0.07

Correlation Coefficient

TRAVEL +  Société Générale

Good diversification

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

Pair Corralation between TRAVEL + and Société Générale

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.74 times more return on investment than Société Générale. However, TRAVEL LEISURE DL 01 is 1.36 times less risky than Société Générale. It trades about 0.23 of its potential returns per unit of risk. Socit Gnrale Socit is currently generating about 0.15 per unit of risk. If you would invest  4,119  in TRAVEL LEISURE DL 01 on October 22, 2024 and sell it today you would earn a total of  931.00  from holding TRAVEL LEISURE DL 01 or generate 22.6% 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.  Socit Gnrale Socit

TRAVEL LEISURE DL

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Socit Gnrale Socit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Socit Gnrale Socit are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Société Générale unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL + and Société Générale

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

The idea behind TRAVEL LEISURE DL 01 and Socit Gnrale Socit 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.