Correlation Between Futura Medical and Travel Leisure

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

By analyzing existing cross correlation between Futura Medical and Travel Leisure Co, you can compare the effects of market volatilities on Futura Medical and Travel Leisure 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 Futura Medical with a short position of Travel Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Futura Medical and Travel Leisure.

Diversification Opportunities for Futura Medical and Travel Leisure

-0.13

Correlation Coefficient

Futura Medical  Travel Leisure

Good diversification

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

Pair Corralation between Futura Medical and Travel Leisure

Assuming the 90 days trading horizon Futura Medical is expected to under-perform the Travel Leisure. But the stock apears to be less risky and, when comparing its historical volatility, Futura Medical is 2.95 times less risky than Travel Leisure. The stock trades about -0.04 of its potential returns per unit of risk. The Travel Leisure Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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

Futura Medical  vs.  Travel Leisure Co

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.

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.

Pair Trading with Futura Medical and Travel Leisure

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

The idea behind Futura Medical and Travel Leisure Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.