Correlation Between Trip Group and Peloton Interactive
Can any of the company-specific risk be diversified away by investing in both Trip Group and Peloton Interactive 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 Trip Group and Peloton Interactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trip Group Limited and Peloton Interactive, you can compare the effects of market volatilities on Trip Group and Peloton Interactive 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 Trip Group with a short position of Peloton Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trip Group and Peloton Interactive.
Diversification Opportunities for Trip Group and Peloton Interactive
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trip and Peloton is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Limited and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive and Trip Group 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 Trip Group Limited are associated (or correlated) with Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of Trip Group i.e., Trip Group and Peloton Interactive go up and down completely randomly.
Pair Corralation between Trip Group and Peloton Interactive
Assuming the 90 days horizon Trip Group is expected to generate 5.5 times less return on investment than Peloton Interactive. But when comparing it to its historical volatility, Trip Group Limited is 2.7 times less risky than Peloton Interactive. It trades about 0.16 of its potential returns per unit of risk. Peloton Interactive is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 555.00 in Peloton Interactive on August 26, 2024 and sell it today you would earn a total of 360.00 from holding Peloton Interactive or generate 64.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trip Group Limited vs. Peloton Interactive
Performance |
| Timeline |
| Trip Group Limited |
| Peloton Interactive |
Trip Group and Peloton Interactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trip Group and Peloton Interactive
The main advantage of trading using opposite Trip Group and Peloton Interactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trip Group position performs unexpectedly, Peloton Interactive 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 Peloton Interactive will offset losses from the drop in Peloton Interactive's long position.The idea behind Trip Group Limited and Peloton Interactive 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.| Peloton Interactive vs. SOUTHWEST AIRLINES | Peloton Interactive vs. United Utilities Group | Peloton Interactive vs. SOLSTAD OFFSHORE NK | Peloton Interactive vs. Eidesvik Offshore ASA |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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