Correlation Between Hilton Worldwide and TripAdvisor

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

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

Diversification Opportunities for Hilton Worldwide and TripAdvisor

0.76

Correlation Coefficient

Hilton Worldwide  TripAdvisor

Poor diversification

The 3 months correlation between Hilton and TripAdvisor is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor and Hilton Worldwide 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 Hilton Worldwide Holdings are associated (or correlated) with TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and TripAdvisor go up and down completely randomly.

Pair Corralation between Hilton Worldwide and TripAdvisor

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to under-perform the TripAdvisor. But the stock apears to be less risky and, when comparing its historical volatility, Hilton Worldwide Holdings is 1.36 times less risky than TripAdvisor. The stock trades about -0.19 of its potential returns per unit of risk. The TripAdvisor is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,772  in TripAdvisor on February 2, 2024 and sell it today you would lose (117.00) from holding TripAdvisor or give up 4.22% of portfolio value over 90 days.

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

Hilton Worldwide Holdings  vs.  TripAdvisor

Hilton Worldwide Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

TripAdvisor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward indicators, TripAdvisor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Worldwide and TripAdvisor

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

The idea behind Hilton Worldwide Holdings and TripAdvisor 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.