Correlation Between InterContinental and Host Hotels

Can any of the company-specific risk be diversified away by investing in both InterContinental and Host 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 InterContinental and Host Hotels 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 Host Hotels Resorts, you can compare the effects of market volatilities on InterContinental and Host 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 InterContinental with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Host Hotels.

Diversification Opportunities for InterContinental and Host Hotels

0.58

Correlation Coefficient

InterContinental  Host Hotels

Very weak diversification

The 3 months correlation between InterContinental and Host is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts 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 Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of InterContinental i.e., InterContinental and Host Hotels go up and down completely randomly.

Pair Corralation between InterContinental and Host Hotels

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.66 times more return on investment than Host Hotels. However, InterContinental Hotels Group is 1.53 times less risky than Host Hotels. It trades about 0.13 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.03 per unit of risk. If you would invest  465,636  in InterContinental Hotels Group on September 24, 2024 and sell it today you would earn a total of  529,964  from holding InterContinental Hotels Group or generate 113.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.21%
Values	Daily Returns

InterContinental Hotels Group  vs.  Host Hotels Resorts

InterContinental Hotels

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, InterContinental exhibited solid returns over the last few months and may actually be approaching a breakup point.

Host Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Host Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with InterContinental and Host Hotels

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

The idea behind InterContinental Hotels Group and Host Hotels Resorts 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.