Correlation Between Howden Joinery and INTERCONT HOTELS

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

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

Diversification Opportunities for Howden Joinery and INTERCONT HOTELS

0.69

Correlation Coefficient

Howden Joinery  INTERCONT HOTELS

Poor diversification

The 3 months correlation between Howden and INTERCONT is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Howden Joinery Group and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and Howden Joinery 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 Howden Joinery Group are associated (or correlated) with INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of Howden Joinery i.e., Howden Joinery and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between Howden Joinery and INTERCONT HOTELS

Assuming the 90 days horizon Howden Joinery Group is expected to generate 1.03 times more return on investment than INTERCONT HOTELS. However, Howden Joinery is 1.03 times more volatile than INTERCONT HOTELS. It trades about -0.05 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about -0.15 per unit of risk. If you would invest  949.00  in Howden Joinery Group on December 23, 2024 and sell it today you would lose (55.00) from holding Howden Joinery Group or give up 5.8% of portfolio value over 90 days.

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

Howden Joinery Group  vs.  INTERCONT HOTELS

Howden Joinery Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Howden Joinery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Howden Joinery is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

INTERCONT HOTELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days INTERCONT HOTELS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Howden Joinery and INTERCONT HOTELS

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

The idea behind Howden Joinery Group and INTERCONT HOTELS 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..