Correlation Between Expedia and Funko
Can any of the company-specific risk be diversified away by investing in both Expedia and Funko 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 Funko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and Funko Inc, you can compare the effects of market volatilities on Expedia and Funko 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 Funko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and Funko.
Diversification Opportunities for Expedia and Funko
Poor diversification
The 3 months correlation between Expedia and Funko is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc 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 Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Expedia i.e., Expedia and Funko go up and down completely randomly.
Pair Corralation between Expedia and Funko
Given the investment horizon of 90 days Expedia Group is expected to under-perform the Funko. But the stock apears to be less risky and, when comparing its historical volatility, Expedia Group is 2.36 times less risky than Funko. The stock trades about -0.17 of its potential returns per unit of risk. The Funko Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 646.00 in Funko Inc on January 19, 2024 and sell it today you would lose (24.00) from holding Funko Inc or give up 3.72% 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. Funko Inc
Performance |
| Timeline |
| Expedia Group |
| Funko Inc |
Expedia and Funko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expedia and Funko
The main advantage of trading using opposite Expedia and Funko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia position performs unexpectedly, Funko 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 Funko will offset losses from the drop in Funko's long position.The idea behind Expedia Group and Funko Inc 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.| Funko vs. Planet Fitness | Funko vs. Cedar Fair LP | Funko vs. American Outdoor Brands | Funko vs. OneSpaWorld 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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