Correlation Between Freddie Mac and InterContinental
Can any of the company-specific risk be diversified away by investing in both Freddie Mac 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 Freddie Mac and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freddie Mac and InterContinental Hotels Group, you can compare the effects of market volatilities on Freddie Mac 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 Freddie Mac with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freddie Mac and InterContinental.
Diversification Opportunities for Freddie Mac and InterContinental
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Freddie and InterContinental is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Freddie Mac and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Freddie Mac 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 Freddie Mac 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 Freddie Mac i.e., Freddie Mac and InterContinental go up and down completely randomly.
Pair Corralation between Freddie Mac and InterContinental
Assuming the 90 days trading horizon Freddie Mac is expected to generate 8.13 times more return on investment than InterContinental. However, Freddie Mac is 8.13 times more volatile than InterContinental Hotels Group. It trades about 0.46 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.48 per unit of risk. If you would invest 134.00 in Freddie Mac on August 28, 2024 and sell it today you would earn a total of 207.00 from holding Freddie Mac or generate 154.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freddie Mac vs. InterContinental Hotels Group
Performance |
| Timeline |
| Freddie Mac |
| InterContinental Hotels |
Freddie Mac and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freddie Mac and InterContinental
The main advantage of trading using opposite Freddie Mac and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freddie Mac 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.| Freddie Mac vs. Young Cos Brewery | Freddie Mac vs. Home Depot | Freddie Mac vs. Tatton Asset Management | Freddie Mac vs. Pets at Home |
| InterContinental vs. Chocoladefabriken Lindt Spruengli | InterContinental vs. National Atomic Co | InterContinental vs. OTP Bank Nyrt | InterContinental vs. Samsung Electronics Co |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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