Correlation Between TRAVEL + and Markel

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

Diversification Opportunities for TRAVEL + and Markel

0.92

Correlation Coefficient

TRAVEL +  Markel

Almost no diversification

The 3 months correlation between TRAVEL and Markel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Markel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel 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 Markel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel has no effect on the direction of TRAVEL + i.e., TRAVEL + and Markel go up and down completely randomly.

Pair Corralation between TRAVEL + and Markel

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.28 times more return on investment than Markel. However, TRAVEL + is 1.28 times more volatile than Markel. It trades about 0.06 of its potential returns per unit of risk. Markel is currently generating about 0.05 per unit of risk. If you would invest  3,174  in TRAVEL LEISURE DL 01 on September 2, 2024 and sell it today you would earn a total of  2,076  from holding TRAVEL LEISURE DL 01 or generate 65.41% 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.  Markel

TRAVEL LEISURE DL

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Markel

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Markel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL + and Markel

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

The idea behind TRAVEL LEISURE DL 01 and Markel 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.