Correlation Between Abercrombie Fitch and Expedia

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

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

Diversification Opportunities for Abercrombie Fitch and Expedia

-0.21

Correlation Coefficient

Abercrombie Fitch  Expedia

Very good diversification

The 3 months correlation between Abercrombie and Expedia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Abercrombie Fitch and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and Abercrombie Fitch 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 Abercrombie Fitch 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 Abercrombie Fitch i.e., Abercrombie Fitch and Expedia go up and down completely randomly.

Pair Corralation between Abercrombie Fitch and Expedia

Considering the 90-day investment horizon Abercrombie Fitch is expected to generate 0.78 times more return on investment than Expedia. However, Abercrombie Fitch is 1.29 times less risky than Expedia. It trades about 0.3 of its potential returns per unit of risk. Expedia Group is currently generating about -0.16 per unit of risk. If you would invest  11,589  in Abercrombie Fitch on February 16, 2024 and sell it today you would earn a total of  2,179  from holding Abercrombie Fitch or generate 18.8% return on investment over 90 days.

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

Abercrombie Fitch  vs.  Expedia Group

Abercrombie Fitch

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Abercrombie Fitch are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Abercrombie Fitch reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Abercrombie Fitch and Expedia

The main advantage of trading using opposite Abercrombie Fitch and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abercrombie Fitch 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 Abercrombie Fitch 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.