Correlation Between Travel Leisure and EVS Broadcast

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

Diversification Opportunities for Travel Leisure and EVS Broadcast

0.17

Correlation Coefficient

Travel Leisure  EVS Broadcast

Average diversification

The 3 months correlation between Travel and EVS is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment 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 EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of Travel Leisure i.e., Travel Leisure and EVS Broadcast go up and down completely randomly.

Pair Corralation between Travel Leisure and EVS Broadcast

Assuming the 90 days trading horizon Travel Leisure Co is expected to generate 5.73 times more return on investment than EVS Broadcast. However, Travel Leisure is 5.73 times more volatile than EVS Broadcast Equipment. It trades about 0.1 of its potential returns per unit of risk. EVS Broadcast Equipment is currently generating about 0.08 per unit of risk. If you would invest  4,367  in Travel Leisure Co on September 21, 2024 and sell it today you would earn a total of  1,448  from holding Travel Leisure Co or generate 33.16% return on investment over 90 days.

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

Travel Leisure Co  vs.  EVS Broadcast Equipment

Travel Leisure

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Travel Leisure Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Travel Leisure unveiled solid returns over the last few months and may actually be approaching a breakup point.

EVS Broadcast Equipment

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Travel Leisure and EVS Broadcast

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

The idea behind Travel Leisure Co and EVS Broadcast Equipment 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.