Correlation Between INTERCONT HOTELS and JAPAN TOBACCO

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

By analyzing existing cross correlation between INTERCONT HOTELS and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on INTERCONT HOTELS and JAPAN TOBACCO 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 INTERCONT HOTELS with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERCONT HOTELS and JAPAN TOBACCO.

Diversification Opportunities for INTERCONT HOTELS and JAPAN TOBACCO

0.17

Correlation Coefficient

INTERCONT HOTELS  JAPAN TOBACCO

Average diversification

The 3 months correlation between INTERCONT and JAPAN is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding INTERCONT HOTELS and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and INTERCONT HOTELS 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 INTERCONT HOTELS are associated (or correlated) with JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of INTERCONT HOTELS i.e., INTERCONT HOTELS and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between INTERCONT HOTELS and JAPAN TOBACCO

Assuming the 90 days trading horizon INTERCONT HOTELS is expected to generate 1.03 times more return on investment than JAPAN TOBACCO. However, INTERCONT HOTELS is 1.03 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.11 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about -0.09 per unit of risk. If you would invest  9,000  in INTERCONT HOTELS on April 23, 2025 and sell it today you would earn a total of  900.00  from holding INTERCONT HOTELS or generate 10.0% return on investment over 90 days.

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

INTERCONT HOTELS  vs.  JAPAN TOBACCO UNSPADR12

INTERCONT HOTELS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INTERCONT HOTELS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, INTERCONT HOTELS may actually be approaching a critical reversion point that can send shares even higher in August 2025.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

Very Weak

Over the last 90 days JAPAN TOBACCO UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INTERCONT HOTELS and JAPAN TOBACCO

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

The idea behind INTERCONT HOTELS and JAPAN TOBACCO UNSPADR12 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.