Correlation Between DeVry Education and INTERCONT HOTELS

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

By analyzing existing cross correlation between DeVry Education Group and INTERCONT HOTELS, you can compare the effects of market volatilities on DeVry Education and INTERCONT HOTELS 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 DeVry Education with a short position of INTERCONT HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DeVry Education and INTERCONT HOTELS.

Diversification Opportunities for DeVry Education and INTERCONT HOTELS

0.68

Correlation Coefficient

DeVry Education  INTERCONT HOTELS

Poor diversification

The 3 months correlation between DeVry and INTERCONT is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding DeVry Education Group and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and DeVry Education 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 DeVry Education Group are associated (or correlated) with INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of DeVry Education i.e., DeVry Education and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between DeVry Education and INTERCONT HOTELS

Assuming the 90 days horizon DeVry Education Group is expected to generate 2.21 times more return on investment than INTERCONT HOTELS. However, DeVry Education is 2.21 times more volatile than INTERCONT HOTELS. It trades about 0.27 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about -0.2 per unit of risk. If you would invest  8,300  in DeVry Education Group on October 11, 2024 and sell it today you would earn a total of  800.00  from holding DeVry Education Group or generate 9.64% return on investment over 90 days.

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

DeVry Education Group  vs.  INTERCONT HOTELS

DeVry Education Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

INTERCONT HOTELS

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with DeVry Education and INTERCONT HOTELS

The main advantage of trading using opposite DeVry Education and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DeVry Education position performs unexpectedly, INTERCONT HOTELS 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 INTERCONT HOTELS will offset losses from the drop in INTERCONT HOTELS's long position.

The idea behind DeVry Education Group and INTERCONT HOTELS 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 Stocks Directory module to find actively traded stocks across global markets.