Correlation Between Expedia and TripAdvisor
Can any of the company-specific risk be diversified away by investing in both Expedia 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 Expedia and TripAdvisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and TripAdvisor, you can compare the effects of market volatilities on Expedia 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 Expedia with a short position of TripAdvisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and TripAdvisor.
Diversification Opportunities for Expedia and TripAdvisor
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Expedia and TripAdvisor is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor 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 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 Expedia i.e., Expedia and TripAdvisor go up and down completely randomly.
Pair Corralation between Expedia and TripAdvisor
Given the investment horizon of 90 days Expedia is expected to generate 3.33 times less return on investment than TripAdvisor. But when comparing it to its historical volatility, Expedia Group is 1.7 times less risky than TripAdvisor. It trades about 0.18 of its potential returns per unit of risk. TripAdvisor is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,389 in TripAdvisor on October 20, 2024 and sell it today you would earn a total of 214.00 from holding TripAdvisor or generate 15.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expedia Group vs. TripAdvisor
Performance |
| Timeline |
| Expedia Group |
| TripAdvisor |
Expedia and TripAdvisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expedia and TripAdvisor
The main advantage of trading using opposite Expedia and TripAdvisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia 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.| Expedia vs. Airbnb Inc | Expedia vs. TripAdvisor | Expedia vs. Royal Caribbean Cruises | Expedia 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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