Correlation Between TRAVEL + and G8 EDUCATION

Can any of the company-specific risk be diversified away by investing in both TRAVEL + and G8 EDUCATION 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 + and G8 EDUCATION 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 G8 EDUCATION, you can compare the effects of market volatilities on TRAVEL + and G8 EDUCATION 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 + with a short position of G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and G8 EDUCATION.

Diversification Opportunities for TRAVEL + and G8 EDUCATION

0.14

Correlation Coefficient

TRAVEL +  G8 EDUCATION

Average diversification

The 3 months correlation between TRAVEL and 3EAG is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION and TRAVEL + 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 G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of TRAVEL + i.e., TRAVEL + and G8 EDUCATION go up and down completely randomly.

Pair Corralation between TRAVEL + and G8 EDUCATION

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.17 times more return on investment than G8 EDUCATION. However, TRAVEL + is 1.17 times more volatile than G8 EDUCATION. It trades about 0.12 of its potential returns per unit of risk. G8 EDUCATION is currently generating about 0.07 per unit of risk. If you would invest  3,920  in TRAVEL LEISURE DL 01 on September 5, 2024 and sell it today you would earn a total of  1,330  from holding TRAVEL LEISURE DL 01 or generate 33.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

TRAVEL LEISURE DL 01  vs.  G8 EDUCATION

TRAVEL LEISURE DL

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

G8 EDUCATION

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G8 EDUCATION are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, G8 EDUCATION may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TRAVEL + and G8 EDUCATION

The main advantage of trading using opposite TRAVEL + and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.

The idea behind TRAVEL LEISURE DL 01 and G8 EDUCATION 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.