Correlation Between TRAVEL LEISURE and First Quantum

Can any of the company-specific risk be diversified away by investing in both TRAVEL LEISURE and First Quantum 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 First Quantum 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 First Quantum Minerals, you can compare the effects of market volatilities on TRAVEL LEISURE and First Quantum 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 First Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and First Quantum.

Diversification Opportunities for TRAVEL LEISURE and First Quantum

0.69

Correlation Coefficient

TRAVEL LEISURE  First Quantum

Poor diversification

The 3 months correlation between TRAVEL and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and First Quantum go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and First Quantum

Assuming the 90 days trading horizon TRAVEL LEISURE is expected to generate 3.11 times less return on investment than First Quantum. But when comparing it to its historical volatility, TRAVEL LEISURE DL 01 is 1.83 times less risky than First Quantum. It trades about 0.04 of its potential returns per unit of risk. First Quantum Minerals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,310  in First Quantum Minerals on September 13, 2024 and sell it today you would earn a total of  42.00  from holding First Quantum Minerals or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

TRAVEL LEISURE DL 01  vs.  First Quantum Minerals

TRAVEL LEISURE DL

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

First Quantum Minerals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, First Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL LEISURE and First Quantum

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

The idea behind TRAVEL LEISURE DL 01 and First Quantum Minerals 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 Stocks Directory module to find actively traded stocks across global markets.