Correlation Between InterContinental and Dow Jones
Can any of the company-specific risk be diversified away by investing in both InterContinental and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on InterContinental and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Dow Jones.
Diversification Opportunities for InterContinental and Dow Jones
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between InterContinental and Dow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of InterContinental i.e., InterContinental and Dow Jones go up and down completely randomly.
Pair Corralation between InterContinental and Dow Jones
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 1.78 times more return on investment than Dow Jones. However, InterContinental is 1.78 times more volatile than Dow Jones Industrial. It trades about 0.35 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.21 per unit of risk. If you would invest 10,100 in InterContinental Hotels Group on August 25, 2024 and sell it today you would earn a total of 1,400 from holding InterContinental Hotels Group or generate 13.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Dow Jones Industrial
Performance |
| Timeline |
InterContinental and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
InterContinental Hotels Group
Pair trading matchups for InterContinental
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with InterContinental and Dow Jones
The main advantage of trading using opposite InterContinental and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| InterContinental vs. COSMOSTEEL HLDGS | InterContinental vs. Fukuyama Transporting Co | InterContinental vs. Big 5 Sporting | InterContinental vs. Transportadora de Gas |
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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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