Correlation Between InterContinental and METHODE ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both InterContinental and METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 METHODE ELECTRONICS, you can compare the effects of market volatilities on InterContinental and METHODE ELECTRONICS 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 METHODE ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and METHODE ELECTRONICS.
Diversification Opportunities for InterContinental and METHODE ELECTRONICS
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between InterContinental and METHODE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS 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 METHODE ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METHODE ELECTRONICS has no effect on the direction of InterContinental i.e., InterContinental and METHODE ELECTRONICS go up and down completely randomly.
Pair Corralation between InterContinental and METHODE ELECTRONICS
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.35 times more return on investment than METHODE ELECTRONICS. However, InterContinental Hotels Group is 2.83 times less risky than METHODE ELECTRONICS. It trades about 0.12 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about -0.05 per unit of risk. If you would invest 5,620 in InterContinental Hotels Group on August 28, 2024 and sell it today you would earn a total of 6,080 from holding InterContinental Hotels Group or generate 108.19% 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. METHODE ELECTRONICS
Performance |
| Timeline |
| InterContinental Hotels |
| METHODE ELECTRONICS |
InterContinental and METHODE ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and METHODE ELECTRONICS
The main advantage of trading using opposite InterContinental and METHODE ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, METHODE ELECTRONICS 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 METHODE ELECTRONICS will offset losses from the drop in METHODE ELECTRONICS's long position.| InterContinental vs. GALENA MINING LTD | InterContinental vs. Zijin Mining Group | InterContinental vs. Gladstone Investment | InterContinental vs. PennyMac Mortgage Investment |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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