Correlation Between Extended Stay and Expedia

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Can any of the company-specific risk be diversified away by investing in both Extended Stay and Expedia 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 Extended Stay and Expedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Stay America and Expedia Group, you can compare the effects of market volatilities on Extended Stay and Expedia 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 Extended Stay with a short position of Expedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Stay and Expedia.

Diversification Opportunities for Extended Stay and Expedia

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Extended and Expedia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Extended Stay America and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and Extended Stay 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 Extended Stay America are associated (or correlated) with Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of Extended Stay i.e., Extended Stay and Expedia go up and down completely randomly.

Pair Corralation between Extended Stay and Expedia

If you would invest  13,553  in Expedia Group on December 30, 2023 and sell it today you would earn a total of  222.00  from holding Expedia Group or generate 1.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Extended Stay America  vs.  Expedia Group

 Performance 
       Timeline  
Extended Stay America 

Risk-Adjusted Performance

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Over the last 90 days Extended Stay America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Extended Stay is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Expedia Group 

Risk-Adjusted Performance

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Low
 
High
Insignificant
Over the last 90 days Expedia Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Expedia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Extended Stay and Expedia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Extended Stay and Expedia

The main advantage of trading using opposite Extended Stay and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Stay position performs unexpectedly, Expedia 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 Expedia will offset losses from the drop in Expedia's long position.
The idea behind Extended Stay America and Expedia Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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