Correlation Between Codere Online and Despegar Corp

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

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

Diversification Opportunities for Codere Online and Despegar Corp

0.81

Correlation Coefficient

Codere Online  Despegar Corp

Very poor diversification

The 3 months correlation between Codere and Despegar is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Codere Online Luxembourg and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp and Codere Online 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 Codere Online Luxembourg are associated (or correlated) with Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of Codere Online i.e., Codere Online and Despegar Corp go up and down completely randomly.

Pair Corralation between Codere Online and Despegar Corp

Assuming the 90 days horizon Codere Online Luxembourg is expected to generate 17.19 times more return on investment than Despegar Corp. However, Codere Online is 17.19 times more volatile than Despegar Corp. It trades about 0.08 of its potential returns per unit of risk. Despegar Corp is currently generating about 0.04 per unit of risk. If you would invest  35.00  in Codere Online Luxembourg on February 26, 2024 and sell it today you would earn a total of  63.00  from holding Codere Online Luxembourg or generate 180.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	65.19%
Values	Daily Returns

Codere Online Luxembourg  vs.  Despegar Corp

Codere Online Luxembourg

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codere Online Luxembourg are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Codere Online showed solid returns over the last few months and may actually be approaching a breakup point.

Despegar Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Codere Online and Despegar Corp

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

The idea behind Codere Online Luxembourg and Despegar Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.