Correlation Between InterContinental and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both InterContinental and Choice 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 Choice 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 Choice Hotels International, you can compare the effects of market volatilities on InterContinental and Choice 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Choice Hotels.
Diversification Opportunities for InterContinental and Choice Hotels
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InterContinental and Choice is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of InterContinental i.e., InterContinental and Choice Hotels go up and down completely randomly.
Pair Corralation between InterContinental and Choice Hotels
Assuming the 90 days horizon InterContinental Hotels Group is expected to generate 1.38 times more return on investment than Choice Hotels. However, InterContinental is 1.38 times more volatile than Choice Hotels International. It trades about 0.11 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.04 per unit of risk. If you would invest 5,621 in InterContinental Hotels Group on September 3, 2024 and sell it today you would earn a total of 6,634 from holding InterContinental Hotels Group or generate 118.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 75.56% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Choice Hotels International
Performance |
| Timeline |
| InterContinental Hotels |
| Choice Hotels Intern |
InterContinental and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Choice Hotels
The main advantage of trading using opposite InterContinental and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Choice 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| InterContinental vs. Hyatt Hotels | InterContinental vs. Choice Hotels International | InterContinental vs. Hilton Worldwide Holdings | InterContinental vs. Wyndham Hotels Resorts |
| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. Marriott International | Choice Hotels vs. Wyndham Hotels Resorts |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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