Correlation Between North American and Corporate Travel
Can any of the company-specific risk be diversified away by investing in both North American and Corporate Travel 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 North American and Corporate Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Corporate Travel Management, you can compare the effects of market volatilities on North American and Corporate Travel 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 North American with a short position of Corporate Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Corporate Travel.
Diversification Opportunities for North American and Corporate Travel
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Corporate is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Corporate Travel Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Travel Man and North American 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 North American Construction are associated (or correlated) with Corporate Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Travel Man has no effect on the direction of North American i.e., North American and Corporate Travel go up and down completely randomly.
Pair Corralation between North American and Corporate Travel
Assuming the 90 days horizon North American Construction is expected to generate 0.82 times more return on investment than Corporate Travel. However, North American Construction is 1.22 times less risky than Corporate Travel. It trades about 0.02 of its potential returns per unit of risk. Corporate Travel Management is currently generating about -0.02 per unit of risk. If you would invest 1,790 in North American Construction on September 4, 2024 and sell it today you would earn a total of 70.00 from holding North American Construction or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
North American Construction vs. Corporate Travel Management
Performance |
| Timeline |
| North American Const |
| Corporate Travel Man |
North American and Corporate Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Corporate Travel
The main advantage of trading using opposite North American and Corporate Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Corporate Travel 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 Corporate Travel will offset losses from the drop in Corporate Travel's long position.| North American vs. Halliburton | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech |
| Corporate Travel vs. Dairy Farm International | Corporate Travel vs. PRECISION DRILLING P | Corporate Travel vs. AWILCO DRILLING PLC | Corporate Travel vs. QBE Insurance Group |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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