Correlation Between Expedia and Escalade Incorporated
Can any of the company-specific risk be diversified away by investing in both Expedia and Escalade Incorporated 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 Escalade Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and Escalade Incorporated, you can compare the effects of market volatilities on Expedia and Escalade Incorporated 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 Escalade Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and Escalade Incorporated.
Diversification Opportunities for Expedia and Escalade Incorporated
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Expedia and Escalade is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated 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 Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of Expedia i.e., Expedia and Escalade Incorporated go up and down completely randomly.
Pair Corralation between Expedia and Escalade Incorporated
Given the investment horizon of 90 days Expedia Group is expected to under-perform the Escalade Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Expedia Group is 1.76 times less risky than Escalade Incorporated. The stock trades about -0.12 of its potential returns per unit of risk. The Escalade Incorporated is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,313 in Escalade Incorporated on January 17, 2024 and sell it today you would lose (37.00) from holding Escalade Incorporated or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expedia Group vs. Escalade Incorporated
Performance |
| Timeline |
| Expedia Group |
| Escalade Incorporated |
Expedia and Escalade Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expedia and Escalade Incorporated
The main advantage of trading using opposite Expedia and Escalade Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia position performs unexpectedly, Escalade Incorporated 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 Escalade Incorporated will offset losses from the drop in Escalade Incorporated's long position.The idea behind Expedia Group and Escalade Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Escalade Incorporated vs. LCI Industries | Escalade Incorporated vs. Winnebago Industries | Escalade Incorporated vs. Thor Industries | Escalade Incorporated vs. EZGO Technologies |
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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