Correlation Between Travel Leisure and EasyJet PLC
Can any of the company-specific risk be diversified away by investing in both Travel Leisure and EasyJet PLC 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 EasyJet PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Travel Leisure Co and EasyJet PLC, you can compare the effects of market volatilities on Travel Leisure and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travel Leisure and EasyJet PLC.
Diversification Opportunities for Travel Leisure and EasyJet PLC
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Travel and EasyJet is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Travel Leisure Co and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 Co are associated (or correlated) with EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Travel Leisure i.e., Travel Leisure and EasyJet PLC go up and down completely randomly.
Pair Corralation between Travel Leisure and EasyJet PLC
Assuming the 90 days trading horizon Travel Leisure Co is expected to generate 4.22 times more return on investment than EasyJet PLC. However, Travel Leisure is 4.22 times more volatile than EasyJet PLC. It trades about 0.03 of its potential returns per unit of risk. EasyJet PLC is currently generating about -0.5 per unit of risk. If you would invest 5,765 in Travel Leisure Co on October 12, 2024 and sell it today you would earn a total of 50.00 from holding Travel Leisure Co or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Travel Leisure Co vs. EasyJet PLC
Performance |
| Timeline |
| Travel Leisure |
| EasyJet PLC |
Travel Leisure and EasyJet PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travel Leisure and EasyJet PLC
The main advantage of trading using opposite Travel Leisure and EasyJet PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travel Leisure position performs unexpectedly, EasyJet PLC 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 EasyJet PLC will offset losses from the drop in EasyJet PLC's long position.| Travel Leisure vs. Walmart | Travel Leisure vs. BYD Co | Travel Leisure vs. Volkswagen AG | Travel Leisure vs. Volkswagen AG Non Vtg |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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