Correlation Between INTERCONT HOTELS and China Railway
Can any of the company-specific risk be diversified away by investing in both INTERCONT HOTELS and China Railway 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 China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INTERCONT HOTELS and China Railway Signal, you can compare the effects of market volatilities on INTERCONT HOTELS and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERCONT HOTELS and China Railway.
Diversification Opportunities for INTERCONT HOTELS and China Railway
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INTERCONT and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding INTERCONT HOTELS and China Railway Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Signal 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Signal has no effect on the direction of INTERCONT HOTELS i.e., INTERCONT HOTELS and China Railway go up and down completely randomly.
Pair Corralation between INTERCONT HOTELS and China Railway
Assuming the 90 days trading horizon INTERCONT HOTELS is expected to generate 3.14 times less return on investment than China Railway. But when comparing it to its historical volatility, INTERCONT HOTELS is 4.81 times less risky than China Railway. It trades about 0.13 of its potential returns per unit of risk. China Railway Signal is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11.00 in China Railway Signal on September 14, 2024 and sell it today you would earn a total of 27.00 from holding China Railway Signal or generate 245.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.64% |
| Values | Daily Returns |
INTERCONT HOTELS vs. China Railway Signal
Performance |
| Timeline |
| INTERCONT HOTELS |
| China Railway Signal |
INTERCONT HOTELS and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INTERCONT HOTELS and China Railway
The main advantage of trading using opposite INTERCONT HOTELS and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERCONT HOTELS position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway'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 |
| China Railway vs. Strategic Education | China Railway vs. Hyatt Hotels | China Railway vs. INTERCONT HOTELS | China Railway vs. IDP EDUCATION LTD |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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