Correlation Between InterContinental and Balfour Beatty
Can any of the company-specific risk be diversified away by investing in both InterContinental and Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty plc, you can compare the effects of market volatilities on InterContinental and Balfour Beatty 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 Balfour Beatty. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Balfour Beatty.
Diversification Opportunities for InterContinental and Balfour Beatty
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between InterContinental and Balfour is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Balfour Beatty plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty plc 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 Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty plc has no effect on the direction of InterContinental i.e., InterContinental and Balfour Beatty go up and down completely randomly.
Pair Corralation between InterContinental and Balfour Beatty
Assuming the 90 days trading horizon InterContinental is expected to generate 1.37 times less return on investment than Balfour Beatty. But when comparing it to its historical volatility, InterContinental Hotels Group is 1.07 times less risky than Balfour Beatty. It trades about 0.28 of its potential returns per unit of risk. Balfour Beatty plc is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 42,600 in Balfour Beatty plc on September 13, 2024 and sell it today you would earn a total of 3,600 from holding Balfour Beatty plc or generate 8.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Balfour Beatty plc
Performance |
| Timeline |
| InterContinental Hotels |
| Balfour Beatty plc |
InterContinental and Balfour Beatty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Balfour Beatty
The main advantage of trading using opposite InterContinental and Balfour Beatty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Balfour Beatty 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 Balfour Beatty will offset losses from the drop in Balfour Beatty's long position.| InterContinental vs. Public Storage | InterContinental vs. Vienna Insurance Group | InterContinental vs. Alliance Data Systems | InterContinental vs. Evolution Gaming Group |
| Balfour Beatty vs. Silvercorp Metals | Balfour Beatty vs. Hochschild Mining plc | Balfour Beatty vs. United States Steel | Balfour Beatty vs. Ironveld 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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