Correlation Between Barrett Business and InterContinental

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

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

Diversification Opportunities for Barrett Business and InterContinental

0.83

Correlation Coefficient

Barrett Business  InterContinental

Very poor diversification

The 3 months correlation between Barrett and InterContinental is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Barrett Business Services and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Barrett Business 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 Barrett Business Services 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 Barrett Business i.e., Barrett Business and InterContinental go up and down completely randomly.

Pair Corralation between Barrett Business and InterContinental

Assuming the 90 days horizon Barrett Business Services is expected to generate 0.74 times more return on investment than InterContinental. However, Barrett Business Services is 1.35 times less risky than InterContinental. It trades about -0.13 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about -0.18 per unit of risk. If you would invest  4,192  in Barrett Business Services on December 25, 2024 and sell it today you would lose (412.00) from holding Barrett Business Services or give up 9.83% of portfolio value over 90 days.

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

Barrett Business Services  vs.  InterContinental Hotels Group

Barrett Business Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barrett Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

InterContinental Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days InterContinental Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 Barrett Business and InterContinental

The main advantage of trading using opposite Barrett Business and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barrett Business 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 Barrett Business Services 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.