Correlation Between Expedia and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Expedia and Dow Jones 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 Expedia and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and Dow Jones Industrial, you can compare the effects of market volatilities on Expedia and Dow Jones 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 Expedia with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and Dow Jones.
Diversification Opportunities for Expedia and Dow Jones
Very poor diversification
The 3 months correlation between Expedia and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Expedia 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 Expedia Group are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Expedia i.e., Expedia and Dow Jones go up and down completely randomly.
Pair Corralation between Expedia and Dow Jones
Assuming the 90 days trading horizon Expedia Group is expected to generate 3.07 times more return on investment than Dow Jones. However, Expedia is 3.07 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 24,700 in Expedia Group on September 3, 2024 and sell it today you would earn a total of 32,084 from holding Expedia Group or generate 129.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expedia Group vs. Dow Jones Industrial
Performance |
| Timeline |
Expedia and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Expedia Group
Pair trading matchups for Expedia
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Expedia and Dow Jones
The main advantage of trading using opposite Expedia and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Expedia vs. BIONTECH SE DRN | Expedia vs. Raytheon Technologies | Expedia vs. Southwest Airlines Co | Expedia vs. Beyond Meat |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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