Correlation Between InterContinental and Sims Metal
Can any of the company-specific risk be diversified away by investing in both InterContinental and Sims Metal 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 Sims Metal 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 Sims Metal Management, you can compare the effects of market volatilities on InterContinental and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Sims Metal.
Diversification Opportunities for InterContinental and Sims Metal
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between InterContinental and Sims is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of InterContinental i.e., InterContinental and Sims Metal go up and down completely randomly.
Pair Corralation between InterContinental and Sims Metal
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.58 times more return on investment than Sims Metal. However, InterContinental Hotels Group is 1.72 times less risky than Sims Metal. It trades about 0.37 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.2 per unit of risk. If you would invest 11,800 in InterContinental Hotels Group on November 5, 2024 and sell it today you would earn a total of 1,100 from holding InterContinental Hotels Group or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Sims Metal Management
Performance |
| Timeline |
| InterContinental Hotels |
| Sims Metal Management |
InterContinental and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Sims Metal
The main advantage of trading using opposite InterContinental and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| InterContinental vs. STEEL DYNAMICS | InterContinental vs. Sumitomo Rubber Industries | InterContinental vs. THRACE PLASTICS | InterContinental vs. PT Steel Pipe |
| Sims Metal vs. GOME Retail Holdings | Sims Metal vs. Caseys General Stores | Sims Metal vs. PLAYMATES TOYS | Sims Metal vs. FRACTAL GAMING GROUP |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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