Correlation Between INTERCONT HOTELS and CMS Energy
Can any of the company-specific risk be diversified away by investing in both INTERCONT HOTELS and CMS Energy 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 CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INTERCONT HOTELS and CMS Energy, you can compare the effects of market volatilities on INTERCONT HOTELS and CMS Energy 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 CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERCONT HOTELS and CMS Energy.
Diversification Opportunities for INTERCONT HOTELS and CMS Energy
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INTERCONT and CMS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding INTERCONT HOTELS and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy 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 CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy has no effect on the direction of INTERCONT HOTELS i.e., INTERCONT HOTELS and CMS Energy go up and down completely randomly.
Pair Corralation between INTERCONT HOTELS and CMS Energy
Assuming the 90 days trading horizon INTERCONT HOTELS is expected to generate 1.76 times more return on investment than CMS Energy. However, INTERCONT HOTELS is 1.76 times more volatile than CMS Energy. It trades about 0.13 of its potential returns per unit of risk. CMS Energy is currently generating about 0.04 per unit of risk. If you would invest 11,600 in INTERCONT HOTELS on September 13, 2024 and sell it today you would earn a total of 500.00 from holding INTERCONT HOTELS or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
INTERCONT HOTELS vs. CMS Energy
Performance |
| Timeline |
| INTERCONT HOTELS |
| CMS Energy |
INTERCONT HOTELS and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INTERCONT HOTELS and CMS Energy
The main advantage of trading using opposite INTERCONT HOTELS and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERCONT HOTELS position performs unexpectedly, CMS Energy 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 CMS Energy will offset losses from the drop in CMS Energy's long position.| INTERCONT HOTELS vs. Hyatt Hotels | INTERCONT HOTELS vs. InterContinental Hotels Group | INTERCONT HOTELS vs. Wyndham Hotels Resorts | INTERCONT HOTELS vs. Choice Hotels International |
| CMS Energy vs. Gold Road Resources | CMS Energy vs. GOLD ROAD RES | CMS Energy vs. INTERSHOP Communications Aktiengesellschaft | CMS Energy vs. TRAINLINE PLC LS |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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