Correlation Between Expedia and Carnival
Can any of the company-specific risk be diversified away by investing in both Expedia and Carnival 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 Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and Carnival, you can compare the effects of market volatilities on Expedia and Carnival 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 Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and Carnival.
Diversification Opportunities for Expedia and Carnival
Very weak diversification
The 3 months correlation between Expedia and Carnival is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival 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 Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival has no effect on the direction of Expedia i.e., Expedia and Carnival go up and down completely randomly.
Pair Corralation between Expedia and Carnival
Given the investment horizon of 90 days Expedia Group is expected to generate 0.59 times more return on investment than Carnival. However, Expedia Group is 1.69 times less risky than Carnival. It trades about -0.01 of its potential returns per unit of risk. Carnival is currently generating about -0.23 per unit of risk. If you would invest 13,662 in Expedia Group on January 26, 2024 and sell it today you would lose (82.00) from holding Expedia Group or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expedia Group vs. Carnival
Performance |
| Timeline |
| Expedia Group |
| Carnival |
Expedia and Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expedia and Carnival
The main advantage of trading using opposite Expedia and Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia position performs unexpectedly, Carnival 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 Carnival will offset losses from the drop in Carnival's long position.| Expedia vs. AirbnbInc | Expedia vs. TripAdvisor | Expedia vs. Royal Caribbean Cruises | Expedia vs. Norwegian Cruise Line |
| Carnival vs. Royal Caribbean Cruises | Carnival vs. AirbnbInc | Carnival vs. Expedia Group | Carnival vs. Booking Holdings |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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