Correlation Between Smart Share and Booking Holdings

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

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

Diversification Opportunities for Smart Share and Booking Holdings

-0.04

Correlation Coefficient

Smart Share  Booking Holdings

Good diversification

The 3 months correlation between Smart and Booking is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and Smart Share 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 Smart Share Global are associated (or correlated) with Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Smart Share i.e., Smart Share and Booking Holdings go up and down completely randomly.

Pair Corralation between Smart Share and Booking Holdings

Allowing for the 90-day total investment horizon Smart Share is expected to generate 4.82 times less return on investment than Booking Holdings. In addition to that, Smart Share is 2.13 times more volatile than Booking Holdings. It trades about 0.02 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.23 per unit of volatility. If you would invest  420,515  in Booking Holdings on September 28, 2024 and sell it today you would earn a total of  91,779  from holding Booking Holdings or generate 21.83% return on investment over 90 days.

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

Smart Share Global  vs.  Booking Holdings

Smart Share Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Smart Share is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Booking Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Booking Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smart Share and Booking Holdings

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

The idea behind Smart Share Global and Booking Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.