Correlation Between Booking Holdings and Expedia

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

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

Diversification Opportunities for Booking Holdings and Expedia

0.97

Correlation Coefficient

Booking Holdings  Expedia

Almost no diversification

The 3 months correlation between Booking and Expedia is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and Booking Holdings 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 Booking Holdings are associated (or correlated) with Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of Booking Holdings i.e., Booking Holdings and Expedia go up and down completely randomly.

Pair Corralation between Booking Holdings and Expedia

Assuming the 90 days trading horizon Booking Holdings is expected to generate 1.47 times less return on investment than Expedia. But when comparing it to its historical volatility, Booking Holdings is 1.38 times less risky than Expedia. It trades about 0.24 of its potential returns per unit of risk. Expedia Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  37,550  in Expedia Group on September 23, 2024 and sell it today you would earn a total of  18,760  from holding Expedia Group or generate 49.96% return on investment over 90 days.

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

Booking Holdings  vs.  Expedia Group

Booking Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Booking Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Expedia Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Expedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Booking Holdings and Expedia

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

The idea behind Booking Holdings and Expedia Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.