Correlation Between InterContinental and Hilton Worldwide

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

Diversification Opportunities for InterContinental and Hilton Worldwide

0.35

Correlation Coefficient

InterContinental  Hilton Worldwide

Weak diversification

The 3 months correlation between InterContinental and Hilton is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Hilton Worldwide Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Worldwide Holdings 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 Hilton Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Worldwide Holdings has no effect on the direction of InterContinental i.e., InterContinental and Hilton Worldwide go up and down completely randomly.

Pair Corralation between InterContinental and Hilton Worldwide

Assuming the 90 days trading horizon InterContinental is expected to generate 2.48 times less return on investment than Hilton Worldwide. In addition to that, InterContinental is 1.18 times more volatile than Hilton Worldwide Holdings. It trades about 0.03 of its total potential returns per unit of risk. Hilton Worldwide Holdings is currently generating about 0.07 per unit of volatility. If you would invest  23,897  in Hilton Worldwide Holdings on December 2, 2024 and sell it today you would earn a total of  1,353  from holding Hilton Worldwide Holdings or generate 5.66% return on investment over 90 days.

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

InterContinental Hotels Group  vs.  Hilton Worldwide Holdings

InterContinental Hotels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, InterContinental is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hilton Worldwide Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 5 (%) 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.

Pair Trading with InterContinental and Hilton Worldwide

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

The idea behind InterContinental Hotels Group and Hilton Worldwide Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.