Correlation Between Trip Group and Amadeus IT

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

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

Diversification Opportunities for Trip Group and Amadeus IT

0.14

Correlation Coefficient

Trip Group  Amadeus IT

Average diversification

The 3 months correlation between Trip and Amadeus is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Ltd and Amadeus IT Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amadeus IT Holding and Trip Group 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 Trip Group Ltd are associated (or correlated) with Amadeus IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amadeus IT Holding has no effect on the direction of Trip Group i.e., Trip Group and Amadeus IT go up and down completely randomly.

Pair Corralation between Trip Group and Amadeus IT

Given the investment horizon of 90 days Trip Group Ltd is expected to generate 2.5 times more return on investment than Amadeus IT. However, Trip Group is 2.5 times more volatile than Amadeus IT Holding. It trades about 0.31 of its potential returns per unit of risk. Amadeus IT Holding is currently generating about 0.06 per unit of risk. If you would invest  6,208  in Trip Group Ltd on September 14, 2024 and sell it today you would earn a total of  1,200  from holding Trip Group Ltd or generate 19.33% return on investment over 90 days.

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

Trip Group Ltd  vs.  Amadeus IT Holding

Trip Group

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trip Group Ltd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Trip Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Amadeus IT Holding

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amadeus IT Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Amadeus IT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Trip Group and Amadeus IT

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

The idea behind Trip Group Ltd and Amadeus IT Holding 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.