Correlation Between Volkswagen and InterContinental
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and InterContinental Hotels Group, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and InterContinental.
Diversification Opportunities for Volkswagen and InterContinental
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and InterContinental is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and InterContinental go up and down completely randomly.
Pair Corralation between Volkswagen and InterContinental
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the InterContinental. In addition to that, Volkswagen is 1.39 times more volatile than InterContinental Hotels Group. It trades about -0.06 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.12 per unit of volatility. If you would invest 693,208 in InterContinental Hotels Group on September 12, 2024 and sell it today you would earn a total of 282,592 from holding InterContinental Hotels Group or generate 40.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. InterContinental Hotels Group
Performance |
| Timeline |
| Volkswagen AG |
| InterContinental Hotels |
Volkswagen and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and InterContinental
The main advantage of trading using opposite Volkswagen and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. Universal Health Services | Volkswagen vs. Induction Healthcare Group | Volkswagen vs. Omega Healthcare Investors | Volkswagen vs. Eco Animal Health |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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