Correlation Between Neinor Homes and InterContinental

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

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

Diversification Opportunities for Neinor Homes and InterContinental

0.57

Correlation Coefficient

Neinor Homes  InterContinental

Very weak diversification

The 3 months correlation between Neinor and InterContinental is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Neinor Homes 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 Neinor Homes SA 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 Neinor Homes i.e., Neinor Homes and InterContinental go up and down completely randomly.

Pair Corralation between Neinor Homes and InterContinental

Assuming the 90 days trading horizon Neinor Homes is expected to generate 1.85 times less return on investment than InterContinental. But when comparing it to its historical volatility, Neinor Homes SA is 1.14 times less risky than InterContinental. It trades about 0.1 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  10,400  in InterContinental Hotels Group on October 21, 2024 and sell it today you would earn a total of  1,700  from holding InterContinental Hotels Group or generate 16.35% return on investment over 90 days.

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

Neinor Homes SA  vs.  InterContinental Hotels Group

Neinor Homes SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Neinor Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

InterContinental Hotels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neinor Homes and InterContinental

The main advantage of trading using opposite Neinor Homes and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neinor Homes 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 Neinor Homes SA 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .