Correlation Between TripAdvisor and Airbnb

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

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

Diversification Opportunities for TripAdvisor and Airbnb

0.86

Correlation Coefficient

TripAdvisor  Airbnb

Very poor diversification

The 3 months correlation between TripAdvisor and Airbnb is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and Airbnb Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbnb Inc and TripAdvisor 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 TripAdvisor are associated (or correlated) with Airbnb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbnb Inc has no effect on the direction of TripAdvisor i.e., TripAdvisor and Airbnb go up and down completely randomly.

Pair Corralation between TripAdvisor and Airbnb

Given the investment horizon of 90 days TripAdvisor is expected to generate 1.33 times more return on investment than Airbnb. However, TripAdvisor is 1.33 times more volatile than Airbnb Inc. It trades about -0.04 of its potential returns per unit of risk. Airbnb Inc is currently generating about -0.07 per unit of risk. If you would invest  1,770  in TripAdvisor on February 19, 2025 and sell it today you would lose (276.00) from holding TripAdvisor or give up 15.59% of portfolio value over 90 days.

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

TripAdvisor  vs.  Airbnb Inc

TripAdvisor

Risk-Adjusted Performance

Very Weak

Over the last 90 days TripAdvisor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Airbnb Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Airbnb Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TripAdvisor and Airbnb

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

The idea behind TripAdvisor and Airbnb Inc 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.