Correlation Between Trip Group and Flight Centre
Can any of the company-specific risk be diversified away by investing in both Trip Group and Flight Centre 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 Flight Centre 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 Flight Centre Travel, you can compare the effects of market volatilities on Trip Group and Flight Centre 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 Flight Centre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trip Group and Flight Centre.
Diversification Opportunities for Trip Group and Flight Centre
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trip and Flight is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Trip Group Limited and Flight Centre Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flight Centre Travel 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 Flight Centre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flight Centre Travel has no effect on the direction of Trip Group i.e., Trip Group and Flight Centre go up and down completely randomly.
Pair Corralation between Trip Group and Flight Centre
Assuming the 90 days horizon Trip Group is expected to generate 1.93 times less return on investment than Flight Centre. In addition to that, Trip Group is 17.25 times more volatile than Flight Centre Travel. It trades about 0.0 of its total potential returns per unit of risk. Flight Centre Travel is currently generating about 0.12 per unit of volatility. If you would invest 1,400 in Flight Centre Travel on September 1, 2024 and sell it today you would earn a total of 20.00 from holding Flight Centre Travel or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 58.27% |
| Values | Daily Returns |
Trip Group Limited vs. Flight Centre Travel
Performance |
| Timeline |
| Trip Group Limited |
| Flight Centre Travel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Trip Group and Flight Centre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trip Group and Flight Centre
The main advantage of trading using opposite Trip Group and Flight Centre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trip Group position performs unexpectedly, Flight Centre 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 Flight Centre will offset losses from the drop in Flight Centre's long position.| Trip Group vs. TripAdvisor | Trip Group vs. MakeMyTrip Limited | Trip Group vs. Tuniu Corp | Trip Group vs. Booking Holdings |
| Flight Centre vs. Norwegian Cruise Line | Flight Centre vs. Carnival | Flight Centre vs. Airbnb Inc | Flight Centre vs. Expedia 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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