Correlation Between InterContinental and Associated British
Can any of the company-specific risk be diversified away by investing in both InterContinental and Associated British 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 Associated British 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 Associated British Foods, you can compare the effects of market volatilities on InterContinental and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Associated British.
Diversification Opportunities for InterContinental and Associated British
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between InterContinental and Associated is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of InterContinental i.e., InterContinental and Associated British go up and down completely randomly.
Pair Corralation between InterContinental and Associated British
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.92 times more return on investment than Associated British. However, InterContinental Hotels Group is 1.09 times less risky than Associated British. It trades about 0.14 of its potential returns per unit of risk. Associated British Foods is currently generating about 0.04 per unit of risk. If you would invest 527,579 in InterContinental Hotels Group on August 31, 2024 and sell it today you would earn a total of 452,421 from holding InterContinental Hotels Group or generate 85.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Associated British Foods
Performance |
| Timeline |
| InterContinental Hotels |
| Associated British Foods |
InterContinental and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Associated British
The main advantage of trading using opposite InterContinental and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| InterContinental vs. STMicroelectronics NV | InterContinental vs. Vulcan Materials Co | InterContinental vs. Zoom Video Communications | InterContinental vs. LPKF Laser Electronics |
| Associated British vs. Aeorema Communications Plc | Associated British vs. British American Tobacco | Associated British vs. Induction Healthcare Group | Associated British vs. Optima Health 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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