Correlation Between Expedia and CVC Brasil

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

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

Diversification Opportunities for Expedia and CVC Brasil

0.51

Correlation Coefficient

Expedia  CVC Brasil

Very weak diversification

The 3 months correlation between Expedia and CVC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and CVC Brasil Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Brasil Operadora and Expedia 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 Expedia Group are associated (or correlated) with CVC Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Brasil Operadora has no effect on the direction of Expedia i.e., Expedia and CVC Brasil go up and down completely randomly.

Pair Corralation between Expedia and CVC Brasil

Assuming the 90 days trading horizon Expedia Group is expected to generate 0.55 times more return on investment than CVC Brasil. However, Expedia Group is 1.8 times less risky than CVC Brasil. It trades about 0.26 of its potential returns per unit of risk. CVC Brasil Operadora is currently generating about -0.02 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Expedia Group  vs.  CVC Brasil Operadora

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.

CVC Brasil Operadora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVC Brasil Operadora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CVC Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Expedia and CVC Brasil

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

The idea behind Expedia Group and CVC Brasil Operadora 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.