Correlation Between INTERCONT HOTELS and AXWAY SOFTWARE
Can any of the company-specific risk be diversified away by investing in both INTERCONT HOTELS and AXWAY SOFTWARE 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 INTERCONT HOTELS and AXWAY SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INTERCONT HOTELS and AXWAY SOFTWARE EO, you can compare the effects of market volatilities on INTERCONT HOTELS and AXWAY SOFTWARE 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 INTERCONT HOTELS with a short position of AXWAY SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERCONT HOTELS and AXWAY SOFTWARE.
Diversification Opportunities for INTERCONT HOTELS and AXWAY SOFTWARE
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between INTERCONT and AXWAY is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding INTERCONT HOTELS and AXWAY SOFTWARE EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXWAY SOFTWARE EO and INTERCONT 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 INTERCONT HOTELS are associated (or correlated) with AXWAY SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXWAY SOFTWARE EO has no effect on the direction of INTERCONT HOTELS i.e., INTERCONT HOTELS and AXWAY SOFTWARE go up and down completely randomly.
Pair Corralation between INTERCONT HOTELS and AXWAY SOFTWARE
Assuming the 90 days trading horizon INTERCONT HOTELS is expected to generate 0.85 times more return on investment than AXWAY SOFTWARE. However, INTERCONT HOTELS is 1.17 times less risky than AXWAY SOFTWARE. It trades about 0.12 of its potential returns per unit of risk. AXWAY SOFTWARE EO is currently generating about 0.04 per unit of risk. If you would invest 5,953 in INTERCONT HOTELS on August 31, 2024 and sell it today you would earn a total of 5,847 from holding INTERCONT HOTELS or generate 98.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
INTERCONT HOTELS vs. AXWAY SOFTWARE EO
Performance |
| Timeline |
| INTERCONT HOTELS |
| AXWAY SOFTWARE EO |
INTERCONT HOTELS and AXWAY SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INTERCONT HOTELS and AXWAY SOFTWARE
The main advantage of trading using opposite INTERCONT HOTELS and AXWAY SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERCONT HOTELS position performs unexpectedly, AXWAY SOFTWARE 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 AXWAY SOFTWARE will offset losses from the drop in AXWAY SOFTWARE's long position.The idea behind INTERCONT HOTELS and AXWAY SOFTWARE EO 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.| AXWAY SOFTWARE vs. Taiwan Semiconductor Manufacturing | AXWAY SOFTWARE vs. Magnachip Semiconductor | AXWAY SOFTWARE vs. PennyMac Mortgage Investment | AXWAY SOFTWARE vs. Elmos Semiconductor SE |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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