Correlation Between Autoliv and Expedia

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

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

Diversification Opportunities for Autoliv and Expedia

-0.62

Correlation Coefficient

Autoliv  Expedia

Excellent diversification

The 3 months correlation between Autoliv and Expedia is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and Autoliv 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 Autoliv 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 Autoliv i.e., Autoliv and Expedia go up and down completely randomly.

Pair Corralation between Autoliv and Expedia

Considering the 90-day investment horizon Autoliv is expected to generate 0.92 times more return on investment than Expedia. However, Autoliv is 1.09 times less risky than Expedia. It trades about -0.25 of its potential returns per unit of risk. Expedia Group is currently generating about -0.28 per unit of risk. If you would invest  12,133  in Autoliv on January 20, 2024 and sell it today you would lose (697.00) from holding Autoliv or give up 5.74% of portfolio value over 90 days.

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

Autoliv  vs.  Expedia Group

Autoliv

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Autoliv may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Expedia Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expedia Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Autoliv and Expedia

The main advantage of trading using opposite Autoliv and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv 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 Autoliv 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.