Correlation Between CHINA SOUTHN and INTERCONT HOTELS

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

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

Diversification Opportunities for CHINA SOUTHN and INTERCONT HOTELS

-0.21

Correlation Coefficient

CHINA SOUTHN  INTERCONT HOTELS

Very good diversification

The 3 months correlation between CHINA and INTERCONT is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and INTERCONT HOTELS

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 1.89 times more return on investment than INTERCONT HOTELS. However, CHINA SOUTHN is 1.89 times more volatile than INTERCONT HOTELS. It trades about -0.06 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about -0.15 per unit of risk. If you would invest  51.00  in CHINA SOUTHN AIR H on December 24, 2024 and sell it today you would lose (7.00) from holding CHINA SOUTHN AIR H or give up 13.73% of portfolio value over 90 days.

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

CHINA SOUTHN AIR H   vs.  INTERCONT HOTELS

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CHINA SOUTHN and INTERCONT HOTELS

The main advantage of trading using opposite CHINA SOUTHN and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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 CHINA SOUTHN AIR H 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.