Correlation Between InterContinental and Major Drilling
Can any of the company-specific risk be diversified away by investing in both InterContinental and Major Drilling 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 Major Drilling 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 Major Drilling Group, you can compare the effects of market volatilities on InterContinental and Major Drilling 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 Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Major Drilling.
Diversification Opportunities for InterContinental and Major Drilling
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between InterContinental and Major is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of InterContinental i.e., InterContinental and Major Drilling go up and down completely randomly.
Pair Corralation between InterContinental and Major Drilling
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.45 times more return on investment than Major Drilling. However, InterContinental Hotels Group is 2.24 times less risky than Major Drilling. It trades about 0.32 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.05 per unit of risk. If you would invest 9,000 in InterContinental Hotels Group on September 3, 2024 and sell it today you would earn a total of 2,800 from holding InterContinental Hotels Group or generate 31.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Major Drilling Group
Performance |
| Timeline |
| InterContinental Hotels |
| Major Drilling Group |
InterContinental and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Major Drilling
The main advantage of trading using opposite InterContinental and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.| InterContinental vs. Hilton Worldwide Holdings | InterContinental vs. Hyatt Hotels | InterContinental vs. INTERCONT HOTELS | InterContinental vs. ACCOR SPADR NEW |
| Major Drilling vs. Commercial Vehicle Group | Major Drilling vs. Citic Telecom International | Major Drilling vs. Hemisphere Energy Corp | Major Drilling vs. Spirent Communications 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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