Correlation Between InterContinental and Erste Group
Can any of the company-specific risk be diversified away by investing in both InterContinental and Erste Group 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 Erste Group 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 Erste Group Bank, you can compare the effects of market volatilities on InterContinental and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Erste Group.
Diversification Opportunities for InterContinental and Erste Group
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InterContinental and Erste is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of InterContinental i.e., InterContinental and Erste Group go up and down completely randomly.
Pair Corralation between InterContinental and Erste Group
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 1.25 times more return on investment than Erste Group. However, InterContinental is 1.25 times more volatile than Erste Group Bank. It trades about 0.47 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.07 per unit of risk. If you would invest 856,200 in InterContinental Hotels Group on September 1, 2024 and sell it today you would earn a total of 123,800 from holding InterContinental Hotels Group or generate 14.46% 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. Erste Group Bank
Performance |
| Timeline |
| InterContinental Hotels |
| Erste Group Bank |
InterContinental and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Erste Group
The main advantage of trading using opposite InterContinental and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| InterContinental vs. FC Investment Trust | InterContinental vs. Ross Stores | InterContinental vs. Monks Investment Trust | InterContinental vs. The Mercantile Investment |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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