Correlation Between InterContinental and Investment
Can any of the company-specific risk be diversified away by investing in both InterContinental and Investment 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 Investment 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 The Investment, you can compare the effects of market volatilities on InterContinental and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Investment.
Diversification Opportunities for InterContinental and Investment
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between InterContinental and Investment is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment has no effect on the direction of InterContinental i.e., InterContinental and Investment go up and down completely randomly.
Pair Corralation between InterContinental and Investment
Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 22.1 times more return on investment than Investment. However, InterContinental is 22.1 times more volatile than The Investment. It trades about 0.55 of its potential returns per unit of risk. The Investment is currently generating about 0.21 per unit of risk. If you would invest 847,400 in InterContinental Hotels Group on September 4, 2024 and sell it today you would earn a total of 138,200 from holding InterContinental Hotels Group or generate 16.31% 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. The Investment
Performance |
| Timeline |
| InterContinental Hotels |
| Investment |
InterContinental and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Investment
The main advantage of trading using opposite InterContinental and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.| InterContinental vs. BYD Co | InterContinental vs. Volkswagen AG | InterContinental vs. Volkswagen AG Non Vtg | InterContinental vs. Compass Group PLC |
| Investment vs. Deltex Medical Group | Investment vs. Wyndham Hotels Resorts | Investment vs. InterContinental Hotels Group | Investment vs. United States Steel |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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