Correlation Between Affiliated Resources and InterContinental

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

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

Diversification Opportunities for Affiliated Resources and InterContinental

-0.66

Correlation Coefficient

Affiliated Resources  InterContinental

Excellent diversification

The 3 months correlation between Affiliated and InterContinental is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Resources Corp and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Affiliated Resources 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 Affiliated Resources Corp 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 Affiliated Resources i.e., Affiliated Resources and InterContinental go up and down completely randomly.

Pair Corralation between Affiliated Resources and InterContinental

Given the investment horizon of 90 days Affiliated Resources is expected to generate 18.53 times less return on investment than InterContinental. In addition to that, Affiliated Resources is 3.02 times more volatile than InterContinental Hotels Group. It trades about 0.0 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.18 per unit of volatility. If you would invest  9,797  in InterContinental Hotels Group on September 14, 2024 and sell it today you would earn a total of  2,548  from holding InterContinental Hotels Group or generate 26.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Affiliated Resources Corp  vs.  InterContinental Hotels Group

Affiliated Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Affiliated Resources is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

InterContinental Hotels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affiliated Resources and InterContinental

The main advantage of trading using opposite Affiliated Resources and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Resources 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 Affiliated Resources Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.