Correlation Between Fifth Third and INTERCONT HOTELS

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

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

Diversification Opportunities for Fifth Third and INTERCONT HOTELS

-0.06

Correlation Coefficient

Fifth Third  INTERCONT HOTELS

Good diversification

The 3 months correlation between Fifth and INTERCONT is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between Fifth Third and INTERCONT HOTELS

Assuming the 90 days horizon Fifth Third Bancorp is expected to under-perform the INTERCONT HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, Fifth Third Bancorp is 1.1 times less risky than INTERCONT HOTELS. The stock trades about -0.08 of its potential returns per unit of risk. The INTERCONT HOTELS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12,000  in INTERCONT HOTELS on December 4, 2024 and sell it today you would lose (200.00) from holding INTERCONT HOTELS or give up 1.67% of portfolio value over 90 days.

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

Fifth Third Bancorp  vs.  INTERCONT HOTELS

Fifth Third Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fifth Third is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, INTERCONT HOTELS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fifth Third and INTERCONT HOTELS

The main advantage of trading using opposite Fifth Third and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.