Correlation Between IMPERIAL TOBACCO and HYATT HOTELS-A

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

By analyzing existing cross correlation between IMPERIAL TOBACCO and HYATT HOTELS A, you can compare the effects of market volatilities on IMPERIAL TOBACCO and HYATT HOTELS-A 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 IMPERIAL TOBACCO with a short position of HYATT HOTELS-A. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and HYATT HOTELS-A.

Diversification Opportunities for IMPERIAL TOBACCO and HYATT HOTELS-A

-0.49

Correlation Coefficient

IMPERIAL TOBACCO  HYATT HOTELS-A

Very good diversification

The 3 months correlation between IMPERIAL and HYATT is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and HYATT HOTELS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYATT HOTELS A and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with HYATT HOTELS-A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYATT HOTELS A has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and HYATT HOTELS-A go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and HYATT HOTELS-A

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.41 times more return on investment than HYATT HOTELS-A. However, IMPERIAL TOBACCO is 2.43 times less risky than HYATT HOTELS-A. It trades about 0.13 of its potential returns per unit of risk. HYATT HOTELS A is currently generating about -0.21 per unit of risk. If you would invest  3,035  in IMPERIAL TOBACCO on December 24, 2024 and sell it today you would earn a total of  205.00  from holding IMPERIAL TOBACCO or generate 6.75% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  HYATT HOTELS A

IMPERIAL TOBACCO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, IMPERIAL TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HYATT HOTELS A

Risk-Adjusted Performance

Very Weak

Over the last 90 days HYATT HOTELS A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with IMPERIAL TOBACCO and HYATT HOTELS-A

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

The idea behind IMPERIAL TOBACCO and HYATT HOTELS A 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.