Correlation Between InterContinental and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both InterContinental and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines Co, you can compare the effects of market volatilities on InterContinental and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Southwest Airlines.
Diversification Opportunities for InterContinental and Southwest Airlines
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InterContinental and Southwest is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of InterContinental i.e., InterContinental and Southwest Airlines go up and down completely randomly.
Pair Corralation between InterContinental and Southwest Airlines
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.71 times more return on investment than Southwest Airlines. However, InterContinental Hotels Group is 1.41 times less risky than Southwest Airlines. It trades about 0.48 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.18 per unit of risk. If you would invest 857,600 in InterContinental Hotels Group on August 28, 2024 and sell it today you would earn a total of 122,400 from holding InterContinental Hotels Group or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Southwest Airlines Co
Performance |
| Timeline |
| InterContinental Hotels |
| Southwest Airlines |
InterContinental and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Southwest Airlines
The main advantage of trading using opposite InterContinental and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| InterContinental vs. Chocoladefabriken Lindt Spruengli | InterContinental vs. National Atomic Co | InterContinental vs. OTP Bank Nyrt | InterContinental vs. Samsung Electronics Co |
| Southwest Airlines vs. PPHE Hotel Group | Southwest Airlines vs. Summit Materials Cl | Southwest Airlines vs. Host Hotels Resorts | Southwest Airlines vs. Norman Broadbent Plc |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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