Correlation Between Data#3 and InterContinental

Can any of the company-specific risk be diversified away by investing in both Data#3 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 Data#3 and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Data3 Limited and InterContinental Hotels Group, you can compare the effects of market volatilities on Data#3 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 Data#3 with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data#3 and InterContinental.

Diversification Opportunities for Data#3 and InterContinental

-0.17

Correlation Coefficient

Data#3  InterContinental

Good diversification

The 3 months correlation between Data#3 and InterContinental is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Data3 Limited and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Data#3 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 Data3 Limited 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 Data#3 i.e., Data#3 and InterContinental go up and down completely randomly.

Pair Corralation between Data#3 and InterContinental

Assuming the 90 days horizon Data3 Limited is expected to under-perform the InterContinental. In addition to that, Data#3 is 1.61 times more volatile than InterContinental Hotels Group. It trades about -0.13 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.21 per unit of volatility. If you would invest  9,950  in InterContinental Hotels Group on October 7, 2024 and sell it today you would earn a total of  2,050  from holding InterContinental Hotels Group or generate 20.6% return on investment over 90 days.

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

Data3 Limited  vs.  InterContinental Hotels Group

Data3 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

InterContinental Hotels

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 16 (%) 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 Data#3 and InterContinental

The main advantage of trading using opposite Data#3 and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data#3 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 Data3 Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.