Correlation Between TripAdvisor and AirbnbInc

Can any of the company-specific risk be diversified away by investing in both TripAdvisor and AirbnbInc 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 TripAdvisor and AirbnbInc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TripAdvisor and AirbnbInc, you can compare the effects of market volatilities on TripAdvisor and AirbnbInc 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 TripAdvisor with a short position of AirbnbInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of TripAdvisor and AirbnbInc.

Diversification Opportunities for TripAdvisor and AirbnbInc

0.74

Correlation Coefficient

TripAdvisor  AirbnbInc

Poor diversification

The 3 months correlation between TripAdvisor and AirbnbInc is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and AirbnbInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirbnbInc and TripAdvisor 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 TripAdvisor are associated (or correlated) with AirbnbInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirbnbInc has no effect on the direction of TripAdvisor i.e., TripAdvisor and AirbnbInc go up and down completely randomly.

Pair Corralation between TripAdvisor and AirbnbInc

Given the investment horizon of 90 days TripAdvisor is expected to generate 1.13 times less return on investment than AirbnbInc. In addition to that, TripAdvisor is 1.45 times more volatile than AirbnbInc. It trades about 0.04 of its total potential returns per unit of risk. AirbnbInc is currently generating about 0.07 per unit of volatility. If you would invest  10,719  in AirbnbInc on February 22, 2024 and sell it today you would earn a total of  3,691  from holding AirbnbInc or generate 34.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

TripAdvisor  vs.  AirbnbInc

TripAdvisor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TripAdvisor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AirbnbInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AirbnbInc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TripAdvisor and AirbnbInc

The main advantage of trading using opposite TripAdvisor and AirbnbInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TripAdvisor position performs unexpectedly, AirbnbInc 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 AirbnbInc will offset losses from the drop in AirbnbInc's long position.

The idea behind TripAdvisor and AirbnbInc 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.

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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 Stocks Directory module to find actively traded stocks across global markets.