Correlation Between Aave and Hostelworld Group

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

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

Diversification Opportunities for Aave and Hostelworld Group

0.52

Correlation Coefficient

Aave  Hostelworld Group

Very weak diversification

The 3 months correlation between Aave and Hostelworld is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aave and Hostelworld Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hostelworld Group PLC and Aave 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 Aave are associated (or correlated) with Hostelworld Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hostelworld Group PLC has no effect on the direction of Aave i.e., Aave and Hostelworld Group go up and down completely randomly.

Pair Corralation between Aave and Hostelworld Group

Assuming the 90 days trading horizon Aave is expected to generate 1.97 times less return on investment than Hostelworld Group. In addition to that, Aave is 1.96 times more volatile than Hostelworld Group PLC. It trades about 0.01 of its total potential returns per unit of risk. Hostelworld Group PLC is currently generating about 0.05 per unit of volatility. If you would invest  100.00  in Hostelworld Group PLC on January 21, 2024 and sell it today you would earn a total of  77.00  from holding Hostelworld Group PLC or generate 77.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.05%
Values	Daily Returns

Aave  vs.  Hostelworld Group PLC

Aave

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aave are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Aave is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hostelworld Group PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hostelworld Group PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hostelworld Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aave and Hostelworld Group

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

The idea behind Aave and Hostelworld Group PLC 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.