Correlation Between Mondee Holdings and Despegar Corp

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

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

Diversification Opportunities for Mondee Holdings and Despegar Corp

-0.2

Correlation Coefficient

Mondee Holdings  Despegar Corp

Good diversification

The 3 months correlation between Mondee and Despegar is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mondee Holdings and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp and Mondee Holdings 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 Mondee Holdings 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 Mondee Holdings i.e., Mondee Holdings and Despegar Corp go up and down completely randomly.

Pair Corralation between Mondee Holdings and Despegar Corp

Given the investment horizon of 90 days Mondee Holdings is expected to generate 5.11 times less return on investment than Despegar Corp. In addition to that, Mondee Holdings is 1.58 times more volatile than Despegar Corp. It trades about 0.01 of its total potential returns per unit of risk. Despegar Corp is currently generating about 0.12 per unit of volatility. If you would invest  1,197  in Despegar Corp on January 30, 2024 and sell it today you would earn a total of  84.00  from holding Despegar Corp or generate 7.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Mondee Holdings  vs.  Despegar Corp

Mondee Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondee Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

Despegar Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mondee Holdings and Despegar Corp

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