Correlation Between AMC Entertainment and TripAdvisor

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

By analyzing existing cross correlation between AMC Entertainment Holdings and TripAdvisor, you can compare the effects of market volatilities on AMC Entertainment and TripAdvisor 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 AMC Entertainment with a short position of TripAdvisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMC Entertainment and TripAdvisor.

Diversification Opportunities for AMC Entertainment and TripAdvisor

-0.38

Correlation Coefficient

AMC Entertainment  TripAdvisor

Very good diversification

The 3 months correlation between AMC and TripAdvisor is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding AMC Entertainment Holdings and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor and AMC Entertainment 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 AMC Entertainment Holdings are associated (or correlated) with TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of AMC Entertainment i.e., AMC Entertainment and TripAdvisor go up and down completely randomly.

Pair Corralation between AMC Entertainment and TripAdvisor

Considering the 90-day investment horizon AMC Entertainment Holdings is expected to under-perform the TripAdvisor. In addition to that, AMC Entertainment is 1.64 times more volatile than TripAdvisor. It trades about -0.05 of its total potential returns per unit of risk. TripAdvisor is currently generating about -0.05 per unit of volatility. If you would invest  1,426  in TripAdvisor on September 13, 2024 and sell it today you would lose (40.00) from holding TripAdvisor or give up 2.81% of portfolio value over 90 days.

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

AMC Entertainment Holdings  vs.  TripAdvisor

AMC Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMC Entertainment Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

TripAdvisor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, TripAdvisor is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AMC Entertainment and TripAdvisor

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

The idea behind AMC Entertainment Holdings and TripAdvisor 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.