Correlation Between Travel Leisure and Futura Medical

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

Diversification Opportunities for Travel Leisure and Futura Medical

-0.13

Correlation Coefficient

Travel Leisure  Futura Medical

Good diversification

The 3 months correlation between Travel and Futura is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and Futura Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futura Medical 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 Futura Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futura Medical has no effect on the direction of Travel Leisure i.e., Travel Leisure and Futura Medical go up and down completely randomly.

Pair Corralation between Travel Leisure and Futura Medical

Assuming the 90 days trading horizon Travel Leisure Co is expected to generate 2.95 times more return on investment than Futura Medical. However, Travel Leisure is 2.95 times more volatile than Futura Medical. It trades about 0.1 of its potential returns per unit of risk. Futura Medical is currently generating about -0.04 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Travel Leisure Co  vs.  Futura Medical

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.

Futura Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Futura Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Futura Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Travel Leisure and Futura Medical

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

The idea behind Travel Leisure Co and Futura Medical 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.