Correlation Between El Pollo and Expedia

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

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

Diversification Opportunities for El Pollo and Expedia

-0.84

Correlation Coefficient

El Pollo  Expedia

Pay attention - limited upside

The 3 months correlation between LOCO and Expedia is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and El Pollo 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 El Pollo Loco 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 El Pollo i.e., El Pollo and Expedia go up and down completely randomly.

Pair Corralation between El Pollo and Expedia

Given the investment horizon of 90 days El Pollo Loco is expected to generate 1.13 times more return on investment than Expedia. However, El Pollo is 1.13 times more volatile than Expedia Group. It trades about 0.24 of its potential returns per unit of risk. Expedia Group is currently generating about -0.27 per unit of risk. If you would invest  869.00  in El Pollo Loco on February 27, 2024 and sell it today you would earn a total of  171.00  from holding El Pollo Loco or generate 19.68% return on investment over 90 days.

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

El Pollo Loco  vs.  Expedia Group

El Pollo Loco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in El Pollo Loco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, El Pollo displayed 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 unsteady 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 El Pollo and Expedia

The main advantage of trading using opposite El Pollo and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo 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 El Pollo Loco 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.