Correlation Between InterContinental and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both InterContinental and Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals, you can compare the effects of market volatilities on InterContinental and Sovereign Metals 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Sovereign Metals.
Diversification Opportunities for InterContinental and Sovereign Metals
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between InterContinental and Sovereign is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of InterContinental i.e., InterContinental and Sovereign Metals go up and down completely randomly.
Pair Corralation between InterContinental and Sovereign Metals
Assuming the 90 days trading horizon InterContinental is expected to generate 1.05 times less return on investment than Sovereign Metals. But when comparing it to its historical volatility, InterContinental Hotels Group is 2.29 times less risky than Sovereign Metals. It trades about 0.15 of its potential returns per unit of risk. Sovereign Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,350 in Sovereign Metals on September 3, 2024 and sell it today you would earn a total of 700.00 from holding Sovereign Metals or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Sovereign Metals
Performance |
| Timeline |
| InterContinental Hotels |
| Sovereign Metals |
InterContinental and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Sovereign Metals
The main advantage of trading using opposite InterContinental and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| InterContinental vs. Rockfire Resources plc | InterContinental vs. Tlou Energy | InterContinental vs. Falcon Oil Gas | InterContinental vs. Helium One Global |
| Sovereign Metals vs. Games Workshop Group | Sovereign Metals vs. Telecom Italia SpA | Sovereign Metals vs. Zegona Communications Plc | Sovereign Metals vs. Molson Coors Beverage |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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