Correlation Between Travel Leisure and MT Bank

Can any of the company-specific risk be diversified away by investing in both Travel Leisure and MT Bank 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 MT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Travel Leisure Co and MT Bank Corp, you can compare the effects of market volatilities on Travel Leisure and MT Bank 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 MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travel Leisure and MT Bank.

Diversification Opportunities for Travel Leisure and MT Bank

-0.09

Correlation Coefficient

Travel Leisure  MT Bank

Good diversification

The 3 months correlation between Travel and 0JW2 is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp 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 Co are associated (or correlated) with MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of Travel Leisure i.e., Travel Leisure and MT Bank go up and down completely randomly.

Pair Corralation between Travel Leisure and MT Bank

Assuming the 90 days trading horizon Travel Leisure is expected to generate 11.54 times less return on investment than MT Bank. But when comparing it to its historical volatility, Travel Leisure Co is 18.68 times less risky than MT Bank. It trades about 0.13 of its potential returns per unit of risk. MT Bank Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,497  in MT Bank Corp on September 27, 2024 and sell it today you would earn a total of  1,580  from holding MT Bank Corp or generate 9.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Travel Leisure Co  vs.  MT Bank Corp

Travel Leisure

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Travel Leisure Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Travel Leisure is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

MT Bank Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, MT Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Travel Leisure and MT Bank

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

The idea behind Travel Leisure Co and MT Bank Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.