Correlation Between Trip Group and Expedia

Can any of the company-specific risk be diversified away by investing in both Trip Group 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 Trip Group and Expedia 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 Expedia Group, you can compare the effects of market volatilities on Trip Group 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 Trip Group with a short position of Expedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trip Group and Expedia.

Diversification Opportunities for Trip Group and Expedia

0.73

Correlation Coefficient

Trip Group  Expedia

Poor diversification

The 3 months correlation between Trip and Expedia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Ltd and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group 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 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 Trip Group i.e., Trip Group and Expedia go up and down completely randomly.

Pair Corralation between Trip Group and Expedia

Given the investment horizon of 90 days Trip Group Ltd is expected to generate 2.25 times more return on investment than Expedia. However, Trip Group is 2.25 times more volatile than Expedia Group. It trades about 0.15 of its potential returns per unit of risk. Expedia Group is currently generating about 0.31 per unit of risk. If you would invest  4,733  in Trip Group Ltd on September 1, 2024 and sell it today you would earn a total of  1,647  from holding Trip Group Ltd or generate 34.8% return on investment over 90 days.

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

Trip Group Ltd  vs.  Expedia Group

Trip Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trip Group Ltd are ranked lower than 11 (%) 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.

Expedia Group

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Expedia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trip Group and Expedia

The main advantage of trading using opposite Trip Group and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trip Group 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.

The idea behind Trip Group Ltd and Expedia Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.