Correlation Between TRAVEL LEISURE and IA FINANCIAL

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and IA FINANCIAL P, you can compare the effects of market volatilities on TRAVEL LEISURE and IA FINANCIAL 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 TRAVEL LEISURE with a short position of IA FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and IA FINANCIAL.

Diversification Opportunities for TRAVEL LEISURE and IA FINANCIAL

0.96

Correlation Coefficient

TRAVEL LEISURE  IA FINANCIAL

Almost no diversification

The 3 months correlation between TRAVEL and 1OD is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and IA FINANCIAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA FINANCIAL P and TRAVEL LEISURE 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 TRAVEL LEISURE DL 01 are associated (or correlated) with IA FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA FINANCIAL P has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and IA FINANCIAL go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and IA FINANCIAL

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.72 times more return on investment than IA FINANCIAL. However, TRAVEL LEISURE DL 01 is 1.39 times less risky than IA FINANCIAL. It trades about 0.22 of its potential returns per unit of risk. IA FINANCIAL P is currently generating about 0.14 per unit of risk. If you would invest  3,941  in TRAVEL LEISURE DL 01 on September 23, 2024 and sell it today you would earn a total of  959.00  from holding TRAVEL LEISURE DL 01 or generate 24.33% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  IA FINANCIAL P

TRAVEL LEISURE DL

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

IA FINANCIAL P

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA FINANCIAL P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IA FINANCIAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL LEISURE and IA FINANCIAL

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

The idea behind TRAVEL LEISURE DL 01 and IA FINANCIAL P 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.