Correlation Between InterContinental and COVIVIO HOTELS
Can any of the company-specific risk be diversified away by investing in both InterContinental and COVIVIO 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 InterContinental and COVIVIO HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InterContinental Hotels Group and COVIVIO HOTELS INH, you can compare the effects of market volatilities on InterContinental and COVIVIO 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 InterContinental with a short position of COVIVIO HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and COVIVIO HOTELS.
Diversification Opportunities for InterContinental and COVIVIO HOTELS
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between InterContinental and COVIVIO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and COVIVIO HOTELS INH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVIVIO HOTELS INH and InterContinental 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 InterContinental Hotels Group are associated (or correlated) with COVIVIO HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVIVIO HOTELS INH has no effect on the direction of InterContinental i.e., InterContinental and COVIVIO HOTELS go up and down completely randomly.
Pair Corralation between InterContinental and COVIVIO HOTELS
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 2.66 times more return on investment than COVIVIO HOTELS. However, InterContinental is 2.66 times more volatile than COVIVIO HOTELS INH. It trades about 0.36 of its potential returns per unit of risk. COVIVIO HOTELS INH is currently generating about -0.16 per unit of risk. If you would invest 10,300 in InterContinental Hotels Group on August 28, 2024 and sell it today you would earn a total of 1,400 from holding InterContinental Hotels Group or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. COVIVIO HOTELS INH
Performance |
| Timeline |
| InterContinental Hotels |
| COVIVIO HOTELS INH |
InterContinental and COVIVIO HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and COVIVIO HOTELS
The main advantage of trading using opposite InterContinental and COVIVIO HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, COVIVIO 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 COVIVIO HOTELS will offset losses from the drop in COVIVIO HOTELS's long position.| InterContinental vs. COMMERCIAL VEHICLE | InterContinental vs. ITALIAN WINE BRANDS | InterContinental vs. Zijin Mining Group | InterContinental vs. Perseus Mining Limited |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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