Correlation Between Huazhu and InterContinental
Can any of the company-specific risk be diversified away by investing in both Huazhu and InterContinental 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 Huazhu and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huazhu Group and InterContinental Hotels Group, you can compare the effects of market volatilities on Huazhu and InterContinental 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 Huazhu with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huazhu and InterContinental.
Diversification Opportunities for Huazhu and InterContinental
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Huazhu and InterContinental is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Huazhu Group and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Huazhu 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 Huazhu Group are associated (or correlated) with InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Huazhu i.e., Huazhu and InterContinental go up and down completely randomly.
Pair Corralation between Huazhu and InterContinental
Given the investment horizon of 90 days Huazhu Group is expected to generate 1.64 times more return on investment than InterContinental. However, Huazhu is 1.64 times more volatile than InterContinental Hotels Group. It trades about 0.08 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about -0.06 per unit of risk. If you would invest 3,756 in Huazhu Group on January 25, 2024 and sell it today you would earn a total of 109.00 from holding Huazhu Group or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huazhu Group vs. InterContinental Hotels Group
Performance |
| Timeline |
| Huazhu Group |
| InterContinental Hotels |
Huazhu and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huazhu and InterContinental
The main advantage of trading using opposite Huazhu and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huazhu position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.| Huazhu vs. GreenTree Hospitality Group | Huazhu vs. Soho House Co | Huazhu vs. InterContinental Hotels Group | Huazhu vs. The Intergroup |
| InterContinental vs. Hilton Worldwide Holdings | InterContinental vs. Marriott International | InterContinental vs. Choice Hotels International | InterContinental vs. Wyndham Hotels Resorts |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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