Correlation Between Hilton Worldwide and Alamo

Can any of the company-specific risk be diversified away by investing in both Hilton Worldwide and Alamo 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 Alamo 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 Alamo Group, you can compare the effects of market volatilities on Hilton Worldwide and Alamo 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 Alamo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and Alamo.

Diversification Opportunities for Hilton Worldwide and Alamo

0.8

Correlation Coefficient

Hilton Worldwide  Alamo

Very poor diversification

The 3 months correlation between Hilton and Alamo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group 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 Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and Alamo go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Alamo

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to generate 0.59 times more return on investment than Alamo. However, Hilton Worldwide Holdings is 1.7 times less risky than Alamo. It trades about -0.11 of its potential returns per unit of risk. Alamo Group is currently generating about -0.08 per unit of risk. If you would invest  25,071  in Hilton Worldwide Holdings on October 22, 2024 and sell it today you would lose (410.00) from holding Hilton Worldwide Holdings or give up 1.64% of portfolio value over 90 days.

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

Hilton Worldwide Holdings  vs.  Alamo Group

Hilton Worldwide Holdings

Risk-Adjusted Performance

4 of 100

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. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Alamo Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Alamo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hilton Worldwide and Alamo

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

The idea behind Hilton Worldwide Holdings and Alamo Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.