Correlation Between InterContinental and Broadcom
Can any of the company-specific risk be diversified away by investing in both InterContinental and Broadcom 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 Broadcom 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 Broadcom, you can compare the effects of market volatilities on InterContinental and Broadcom 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 Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Broadcom.
Diversification Opportunities for InterContinental and Broadcom
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between InterContinental and Broadcom is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom 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 Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of InterContinental i.e., InterContinental and Broadcom go up and down completely randomly.
Pair Corralation between InterContinental and Broadcom
Assuming the 90 days trading horizon InterContinental is expected to generate 1.87 times less return on investment than Broadcom. But when comparing it to its historical volatility, InterContinental Hotels Group is 2.07 times less risky than Broadcom. It trades about 0.12 of its potential returns per unit of risk. Broadcom is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,343 in Broadcom on November 1, 2024 and sell it today you would earn a total of 14,303 from holding Broadcom or generate 267.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Broadcom
Performance |
| Timeline |
| InterContinental Hotels |
| Broadcom |
InterContinental and Broadcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Broadcom
The main advantage of trading using opposite InterContinental and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Broadcom 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 Broadcom will offset losses from the drop in Broadcom's long position.| InterContinental vs. American Airlines Group | InterContinental vs. Gol Intelligent Airlines | InterContinental vs. BlueScope Steel Limited | InterContinental vs. Urban Outfitters |
| Broadcom vs. Focus Home Interactive | Broadcom vs. Xenia Hotels Resorts | Broadcom vs. InterContinental Hotels Group | Broadcom vs. MELIA HOTELS |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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