Correlation Between ERSTE GP and INTERCONT HOTELS
Can any of the company-specific risk be diversified away by investing in both ERSTE GP and INTERCONT HOTELS 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 ERSTE GP and INTERCONT HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ERSTE GP BNK and INTERCONT HOTELS, you can compare the effects of market volatilities on ERSTE GP and INTERCONT HOTELS 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 ERSTE GP with a short position of INTERCONT HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERSTE GP and INTERCONT HOTELS.
Diversification Opportunities for ERSTE GP and INTERCONT HOTELS
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ERSTE and INTERCONT is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ERSTE GP BNK and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and ERSTE GP 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 ERSTE GP BNK are associated (or correlated) with INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of ERSTE GP i.e., ERSTE GP and INTERCONT HOTELS go up and down completely randomly.
Pair Corralation between ERSTE GP and INTERCONT HOTELS
Assuming the 90 days trading horizon ERSTE GP is expected to generate 7.06 times less return on investment than INTERCONT HOTELS. But when comparing it to its historical volatility, ERSTE GP BNK is 1.52 times less risky than INTERCONT HOTELS. It trades about 0.05 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 10,200 in INTERCONT HOTELS on August 28, 2024 and sell it today you would earn a total of 1,400 from holding INTERCONT HOTELS or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ERSTE GP BNK vs. INTERCONT HOTELS
Performance |
| Timeline |
| ERSTE GP BNK |
| INTERCONT HOTELS |
ERSTE GP and INTERCONT HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ERSTE GP and INTERCONT HOTELS
The main advantage of trading using opposite ERSTE GP and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ERSTE GP position performs unexpectedly, INTERCONT HOTELS 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 INTERCONT HOTELS will offset losses from the drop in INTERCONT HOTELS's long position.| ERSTE GP vs. NORTHEAST UTILITIES | ERSTE GP vs. STMicroelectronics NV | ERSTE GP vs. LGI Homes | ERSTE GP vs. BYD ELECTRONIC |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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