Correlation Between DXC Technology and InterContinental

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

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

Diversification Opportunities for DXC Technology and InterContinental

0.24

Correlation Coefficient

DXC Technology  InterContinental

Modest diversification

The 3 months correlation between DXC and InterContinental is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and DXC Technology 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 DXC Technology Co 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 DXC Technology i.e., DXC Technology and InterContinental go up and down completely randomly.

Pair Corralation between DXC Technology and InterContinental

Assuming the 90 days trading horizon DXC Technology Co is expected to under-perform the InterContinental. In addition to that, DXC Technology is 1.32 times more volatile than InterContinental Hotels Group. It trades about -0.15 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.03 per unit of volatility. If you would invest  11,900  in InterContinental Hotels Group on December 2, 2024 and sell it today you would earn a total of  200.00  from holding InterContinental Hotels Group or generate 1.68% return on investment over 90 days.

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

DXC Technology Co  vs.  InterContinental Hotels Group

DXC Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

InterContinental Hotels

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, InterContinental is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DXC Technology and InterContinental

The main advantage of trading using opposite DXC Technology and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology 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 DXC Technology Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.