Correlation Between Choice Hotels and InterContinental
Can any of the company-specific risk be diversified away by investing in both Choice Hotels 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 Choice Hotels and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Hotels International and InterContinental Hotels Group, you can compare the effects of market volatilities on Choice Hotels 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 Choice Hotels with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and InterContinental.
Diversification Opportunities for Choice Hotels and InterContinental
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Choice and InterContinental is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Choice Hotels 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 Choice Hotels International 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 Choice Hotels i.e., Choice Hotels and InterContinental go up and down completely randomly.
Pair Corralation between Choice Hotels and InterContinental
Considering the 90-day investment horizon Choice Hotels is expected to generate 1.44 times less return on investment than InterContinental. But when comparing it to its historical volatility, Choice Hotels International is 1.24 times less risky than InterContinental. It trades about 0.29 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 11,308 in InterContinental Hotels Group on August 27, 2024 and sell it today you would earn a total of 1,033 from holding InterContinental Hotels Group or generate 9.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. InterContinental Hotels Group
Performance |
| Timeline |
| Choice Hotels Intern |
| InterContinental Hotels |
Choice Hotels and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and InterContinental
The main advantage of trading using opposite Choice Hotels and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels 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.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
| InterContinental vs. Hilton Worldwide Holdings | InterContinental vs. Marriott International | InterContinental vs. Choice Hotels International | InterContinental vs. Wyndham Hotels Resorts |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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