Correlation Between Booking Holdings and TripAdvisor
Can any of the company-specific risk be diversified away by investing in both Booking Holdings and TripAdvisor 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 Booking Holdings and TripAdvisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Booking Holdings and TripAdvisor, you can compare the effects of market volatilities on Booking Holdings and TripAdvisor 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 Booking Holdings with a short position of TripAdvisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booking Holdings and TripAdvisor.
Diversification Opportunities for Booking Holdings and TripAdvisor
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Booking and TripAdvisor is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor and Booking Holdings 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 Booking Holdings are associated (or correlated) with TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of Booking Holdings i.e., Booking Holdings and TripAdvisor go up and down completely randomly.
Pair Corralation between Booking Holdings and TripAdvisor
Given the investment horizon of 90 days Booking Holdings is expected to generate 0.5 times more return on investment than TripAdvisor. However, Booking Holdings is 2.01 times less risky than TripAdvisor. It trades about 0.48 of its potential returns per unit of risk. TripAdvisor is currently generating about -0.16 per unit of risk. If you would invest 437,778 in Booking Holdings on August 23, 2024 and sell it today you would earn a total of 83,314 from holding Booking Holdings or generate 19.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Booking Holdings vs. TripAdvisor
Performance |
| Timeline |
| Booking Holdings |
| TripAdvisor |
Booking Holdings and TripAdvisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Booking Holdings and TripAdvisor
The main advantage of trading using opposite Booking Holdings and TripAdvisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booking Holdings position performs unexpectedly, TripAdvisor 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 TripAdvisor will offset losses from the drop in TripAdvisor's long position.| Booking Holdings vs. TripAdvisor | Booking Holdings vs. Airbnb Inc | Booking Holdings vs. Royal Caribbean Cruises | Booking Holdings vs. Norwegian Cruise Line |
| TripAdvisor vs. Booking Holdings | TripAdvisor vs. Airbnb Inc | TripAdvisor vs. Royal Caribbean Cruises | TripAdvisor vs. Norwegian Cruise Line |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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