Correlation Between Indutrade and InterContinental

Can any of the company-specific risk be diversified away by investing in both Indutrade and InterContinental 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 Indutrade and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indutrade AB and InterContinental Hotels Group, you can compare the effects of market volatilities on Indutrade and InterContinental 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 Indutrade with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and InterContinental.

Diversification Opportunities for Indutrade and InterContinental

0.25

Correlation Coefficient

Indutrade  InterContinental

Modest diversification

The 3 months correlation between Indutrade and InterContinental is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Indutrade 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 Indutrade AB are associated (or correlated) with InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Indutrade i.e., Indutrade and InterContinental go up and down completely randomly.

Pair Corralation between Indutrade and InterContinental

Assuming the 90 days trading horizon Indutrade AB is expected to generate 1.06 times more return on investment than InterContinental. However, Indutrade is 1.06 times more volatile than InterContinental Hotels Group. It trades about 0.03 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about -0.17 per unit of risk. If you would invest  27,950  in Indutrade AB on December 27, 2024 and sell it today you would earn a total of  600.00  from holding Indutrade AB or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Indutrade AB  vs.  InterContinental Hotels Group

Indutrade AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

InterContinental Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days InterContinental Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Indutrade and InterContinental

The main advantage of trading using opposite Indutrade and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.

The idea behind Indutrade AB and InterContinental Hotels Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.