Correlation Between Steel Connect and Travelzoo

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

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

Diversification Opportunities for Steel Connect and Travelzoo

0.0

Correlation Coefficient

Steel Connect  Travelzoo

Pay attention - limited upside

The 3 months correlation between Steel and Travelzoo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Steel Connect and Travelzoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travelzoo and Steel Connect 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 Steel Connect are associated (or correlated) with Travelzoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travelzoo has no effect on the direction of Steel Connect i.e., Steel Connect and Travelzoo go up and down completely randomly.

Pair Corralation between Steel Connect and Travelzoo

Given the investment horizon of 90 days Steel Connect is expected to generate 1.2 times more return on investment than Travelzoo. However, Steel Connect is 1.2 times more volatile than Travelzoo. It trades about 0.28 of its potential returns per unit of risk. Travelzoo is currently generating about -0.34 per unit of risk. If you would invest  984.00  in Steel Connect on January 25, 2024 and sell it today you would earn a total of  223.00  from holding Steel Connect or generate 22.66% return on investment over 90 days.

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

Steel Connect  vs.  Travelzoo

Steel Connect

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Steel Connect displayed solid returns over the last few months and may actually be approaching a breakup point.

Travelzoo

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Travelzoo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Travelzoo may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Steel Connect and Travelzoo

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

The idea behind Steel Connect and Travelzoo 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.