Correlation Between Air Transport and InterContinental
Can any of the company-specific risk be diversified away by investing in both Air Transport and InterContinental 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 Air Transport and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and InterContinental Hotels Group, you can compare the effects of market volatilities on Air Transport and InterContinental 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 Air Transport with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and InterContinental.
Diversification Opportunities for Air Transport and InterContinental
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and InterContinental is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Air Transport 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 Air Transport Services are associated (or correlated) with InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Air Transport i.e., Air Transport and InterContinental go up and down completely randomly.
Pair Corralation between Air Transport and InterContinental
Assuming the 90 days horizon Air Transport is expected to generate 2.86 times less return on investment than InterContinental. But when comparing it to its historical volatility, Air Transport Services is 1.56 times less risky than InterContinental. It trades about 0.23 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 10,100 in InterContinental Hotels Group on September 3, 2024 and sell it today you would earn a total of 1,700 from holding InterContinental Hotels Group or generate 16.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. InterContinental Hotels Group
Performance |
| Timeline |
| Air Transport Services |
| InterContinental Hotels |
Air Transport and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and InterContinental
The main advantage of trading using opposite Air Transport and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.| Air Transport vs. Computershare Limited | Air Transport vs. Ribbon Communications | Air Transport vs. Axcelis Technologies | Air Transport vs. Playtech plc |
| InterContinental vs. Hilton Worldwide Holdings | InterContinental vs. Hyatt Hotels | InterContinental vs. INTERCONT HOTELS | InterContinental vs. ACCOR SPADR NEW |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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