Correlation Between InterContinental and Odfjell Drilling
Can any of the company-specific risk be diversified away by investing in both InterContinental and Odfjell 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 Odfjell 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 Odfjell Drilling, you can compare the effects of market volatilities on InterContinental and Odfjell 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 Odfjell Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Odfjell Drilling.
Diversification Opportunities for InterContinental and Odfjell Drilling
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between InterContinental and Odfjell is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Odfjell Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell Drilling 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 Odfjell Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell Drilling has no effect on the direction of InterContinental i.e., InterContinental and Odfjell Drilling go up and down completely randomly.
Pair Corralation between InterContinental and Odfjell Drilling
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.42 times more return on investment than Odfjell Drilling. However, InterContinental Hotels Group is 2.38 times less risky than Odfjell Drilling. It trades about 0.28 of its potential returns per unit of risk. Odfjell Drilling is currently generating about 0.05 per unit of risk. If you would invest 935,000 in InterContinental Hotels Group on September 13, 2024 and sell it today you would earn a total of 56,800 from holding InterContinental Hotels Group or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Odfjell Drilling
Performance |
| Timeline |
| InterContinental Hotels |
| Odfjell Drilling |
InterContinental and Odfjell Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Odfjell Drilling
The main advantage of trading using opposite InterContinental and Odfjell Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Odfjell 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 Odfjell Drilling will offset losses from the drop in Odfjell Drilling's long position.| InterContinental vs. Public Storage | InterContinental vs. Vienna Insurance Group | InterContinental vs. Alliance Data Systems | InterContinental vs. Evolution Gaming Group |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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