Correlation Between Warner Bros and TripAdvisor

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

By analyzing existing cross correlation between Warner Bros Discovery and TripAdvisor, you can compare the effects of market volatilities on Warner Bros and TripAdvisor 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 Warner Bros with a short position of TripAdvisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Bros and TripAdvisor.

Diversification Opportunities for Warner Bros and TripAdvisor

-0.31

Correlation Coefficient

Warner Bros  TripAdvisor

Very good diversification

The 3 months correlation between Warner and TripAdvisor is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor and Warner Bros 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 Warner Bros Discovery are associated (or correlated) with TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of Warner Bros i.e., Warner Bros and TripAdvisor go up and down completely randomly.

Pair Corralation between Warner Bros and TripAdvisor

Considering the 90-day investment horizon Warner Bros Discovery is expected to generate 1.04 times more return on investment than TripAdvisor. However, Warner Bros is 1.04 times more volatile than TripAdvisor. It trades about 0.0 of its potential returns per unit of risk. TripAdvisor is currently generating about 0.0 per unit of risk. If you would invest  1,311  in Warner Bros Discovery on September 12, 2024 and sell it today you would lose (222.00) from holding Warner Bros Discovery or give up 16.93% of portfolio value over 90 days.

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

Warner Bros Discovery  vs.  TripAdvisor

Warner Bros Discovery

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

TripAdvisor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward indicators, TripAdvisor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Warner Bros and TripAdvisor

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

The idea behind Warner Bros Discovery and TripAdvisor 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.