Correlation Between Hilton Worldwide and Consolidated Communications

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

Diversification Opportunities for Hilton Worldwide and Consolidated Communications

0.69

Correlation Coefficient

Hilton Worldwide  Consolidated Communications

Poor diversification

The 3 months correlation between Hilton and Consolidated is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Consolidated Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and Consolidated Communications go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Consolidated Communications

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to generate 4.24 times more return on investment than Consolidated Communications. However, Hilton Worldwide is 4.24 times more volatile than Consolidated Communications. It trades about 0.24 of its potential returns per unit of risk. Consolidated Communications is currently generating about 0.09 per unit of risk. If you would invest  21,669  in Hilton Worldwide Holdings on September 13, 2024 and sell it today you would earn a total of  3,921  from holding Hilton Worldwide Holdings or generate 18.09% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Consolidated Communications

Hilton Worldwide Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Hilton Worldwide unveiled solid returns over the last few months and may actually be approaching a breakup point.

Consolidated Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Consolidated Communications is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hilton Worldwide and Consolidated Communications

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

The idea behind Hilton Worldwide Holdings and Consolidated Communications 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.