Correlation Between Frontdoor and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Frontdoor and Booking Holdings 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 Frontdoor and Booking Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontdoor and Booking Holdings, you can compare the effects of market volatilities on Frontdoor and Booking Holdings 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 Frontdoor with a short position of Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontdoor and Booking Holdings.
Diversification Opportunities for Frontdoor and Booking Holdings
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Frontdoor and Booking is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and Frontdoor 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 Frontdoor are associated (or correlated) with Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Frontdoor i.e., Frontdoor and Booking Holdings go up and down completely randomly.
Pair Corralation between Frontdoor and Booking Holdings
Given the investment horizon of 90 days Frontdoor is expected to generate 1.03 times less return on investment than Booking Holdings. In addition to that, Frontdoor is 1.56 times more volatile than Booking Holdings. It trades about 0.28 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.45 per unit of volatility. If you would invest 442,754 in Booking Holdings on August 30, 2024 and sell it today you would earn a total of 79,561 from holding Booking Holdings or generate 17.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontdoor vs. Booking Holdings
Performance |
| Timeline |
| Frontdoor |
| Booking Holdings |
Frontdoor and Booking Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontdoor and Booking Holdings
The main advantage of trading using opposite Frontdoor and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontdoor position performs unexpectedly, Booking Holdings 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 Booking Holdings will offset losses from the drop in Booking Holdings' long position.| Frontdoor vs. Bright Horizons Family | Frontdoor vs. Smart Share Global | Frontdoor vs. Mister Car Wash | Frontdoor vs. Carriage Services |
| Booking Holdings vs. TripAdvisor | Booking Holdings vs. Airbnb Inc | Booking Holdings vs. Royal Caribbean Cruises | Booking Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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