Correlation Between Despegar Corp and Asia Pptys

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

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

Diversification Opportunities for Despegar Corp and Asia Pptys

-0.66

Correlation Coefficient

Despegar Corp  Asia Pptys

Excellent diversification

The 3 months correlation between Despegar and Asia is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Despegar Corp and Asia Pptys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pptys and Despegar Corp 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 Despegar Corp are associated (or correlated) with Asia Pptys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pptys has no effect on the direction of Despegar Corp i.e., Despegar Corp and Asia Pptys go up and down completely randomly.

Pair Corralation between Despegar Corp and Asia Pptys

Given the investment horizon of 90 days Despegar Corp is expected to generate 2.42 times less return on investment than Asia Pptys. But when comparing it to its historical volatility, Despegar Corp is 5.73 times less risky than Asia Pptys. It trades about 0.24 of its potential returns per unit of risk. Asia Pptys is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.10  in Asia Pptys on August 2, 2024 and sell it today you would earn a total of  0.23  from holding Asia Pptys or generate 3.77% return on investment over 90 days.

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

Despegar Corp  vs.  Asia Pptys

Despegar Corp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Asia Pptys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Pptys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Asia Pptys is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Despegar Corp and Asia Pptys

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

The idea behind Despegar Corp and Asia Pptys 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.