Correlation Between Basic Materials and Expedia
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Expedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Expedia Group, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Expedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Expedia.
Diversification Opportunities for Basic Materials and Expedia
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and Expedia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Expedia go up and down completely randomly.
Pair Corralation between Basic Materials and Expedia
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Expedia. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.88 times less risky than Expedia. The index trades about 0.0 of its potential returns per unit of risk. The Expedia Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 24,700 in Expedia Group on September 23, 2024 and sell it today you would earn a total of 31,610 from holding Expedia Group or generate 127.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Basic Materials vs. Expedia Group
Performance |
Timeline |
Basic Materials and Expedia Volatility Contrast
Predicted Return Density |
Returns |
Basic Materials
Pair trading matchups for Basic Materials
Expedia Group
Pair trading matchups for Expedia
Pair Trading with Basic Materials and Expedia
The main advantage of trading using opposite Basic Materials and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.Basic Materials vs. Cognizant Technology Solutions | Basic Materials vs. T Mobile | Basic Materials vs. Lupatech SA | Basic Materials vs. Uber Technologies |
Expedia vs. Booking Holdings | Expedia vs. Royal Caribbean Cruises | Expedia vs. Carnival plc | Expedia vs. Norwegian Cruise Line |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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