Correlation Between Hilton Worldwide and INTERCONT HOTELS

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

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

Diversification Opportunities for Hilton Worldwide and INTERCONT HOTELS

0.47

Correlation Coefficient

Hilton Worldwide  INTERCONT HOTELS

Very weak diversification

The 3 months correlation between Hilton and INTERCONT is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between Hilton Worldwide and INTERCONT HOTELS

Assuming the 90 days trading horizon Hilton Worldwide Holdings is expected to generate 0.94 times more return on investment than INTERCONT HOTELS. However, Hilton Worldwide Holdings is 1.07 times less risky than INTERCONT HOTELS. It trades about 0.06 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about -0.01 per unit of risk. If you would invest  23,547  in Hilton Worldwide Holdings on November 29, 2024 and sell it today you would earn a total of  943.00  from holding Hilton Worldwide Holdings or generate 4.0% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  INTERCONT HOTELS

Hilton Worldwide Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hilton Worldwide 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

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 Hilton Worldwide and INTERCONT HOTELS

The main advantage of trading using opposite Hilton Worldwide and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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 Hilton Worldwide Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.