Correlation Between Diversified Energy and InterContinental
Can any of the company-specific risk be diversified away by investing in both Diversified Energy 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 Diversified Energy and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Energy and InterContinental Hotels Group, you can compare the effects of market volatilities on Diversified Energy 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 Diversified Energy with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Energy and InterContinental.
Diversification Opportunities for Diversified Energy and InterContinental
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diversified and InterContinental is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Diversified Energy 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 Diversified Energy 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 Diversified Energy i.e., Diversified Energy and InterContinental go up and down completely randomly.
Pair Corralation between Diversified Energy and InterContinental
Assuming the 90 days trading horizon Diversified Energy is expected to under-perform the InterContinental. In addition to that, Diversified Energy is 2.0 times more volatile than InterContinental Hotels Group. It trades about -0.1 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.56 per unit of volatility. If you would invest 980,400 in InterContinental Hotels Group on November 7, 2024 and sell it today you would earn a total of 101,600 from holding InterContinental Hotels Group or generate 10.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Energy vs. InterContinental Hotels Group
Performance |
| Timeline |
| Diversified Energy |
| InterContinental Hotels |
Diversified Energy and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Energy and InterContinental
The main advantage of trading using opposite Diversified Energy and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Energy 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.| Diversified Energy vs. The Mercantile Investment | Diversified Energy vs. Samsung Electronics Co | Diversified Energy vs. GlobalData PLC | Diversified Energy vs. Mineral Financial Investments |
| InterContinental vs. SupplyMe Capital PLC | InterContinental vs. SM Energy Co | InterContinental vs. Grand Vision Media | InterContinental vs. DG Innovate PLC |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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