Correlation Between ERSTE GP and INTERCONT HOTELS

Can any of the company-specific risk be diversified away by investing in both ERSTE GP and INTERCONT 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 ERSTE GP and INTERCONT HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ERSTE GP BNK and INTERCONT HOTELS, you can compare the effects of market volatilities on ERSTE GP and INTERCONT 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 ERSTE GP with a short position of INTERCONT HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERSTE GP and INTERCONT HOTELS.

Diversification Opportunities for ERSTE GP and INTERCONT HOTELS

-0.52

Correlation Coefficient

ERSTE GP  INTERCONT HOTELS

Excellent diversification

The 3 months correlation between ERSTE and INTERCONT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding ERSTE GP BNK and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and ERSTE GP 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 ERSTE GP BNK are associated (or correlated) with INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of ERSTE GP i.e., ERSTE GP and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between ERSTE GP and INTERCONT HOTELS

Assuming the 90 days trading horizon ERSTE GP BNK is expected to generate 1.28 times more return on investment than INTERCONT HOTELS. However, ERSTE GP is 1.28 times more volatile than INTERCONT HOTELS. It trades about 0.12 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about -0.15 per unit of risk. If you would invest  2,920  in ERSTE GP BNK on December 30, 2024 and sell it today you would earn a total of  440.00  from holding ERSTE GP BNK or generate 15.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ERSTE GP BNK  vs.  INTERCONT HOTELS

ERSTE GP BNK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ERSTE GP BNK are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ERSTE GP reported solid returns over the last few months and may actually be approaching a breakup point.

INTERCONT HOTELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days INTERCONT HOTELS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ERSTE GP and INTERCONT HOTELS

The main advantage of trading using opposite ERSTE GP and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ERSTE GP position performs unexpectedly, INTERCONT 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 INTERCONT HOTELS will offset losses from the drop in INTERCONT HOTELS's long position.

The idea behind ERSTE GP BNK and INTERCONT HOTELS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.