Correlation Between InterContinental and Northern Graphite

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

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

Diversification Opportunities for InterContinental and Northern Graphite

0.74

Correlation Coefficient

InterContinental  Northern Graphite

Poor diversification

The 3 months correlation between InterContinental and Northern is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite and InterContinental 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 InterContinental Hotels Group are associated (or correlated) with Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of InterContinental i.e., InterContinental and Northern Graphite go up and down completely randomly.

Pair Corralation between InterContinental and Northern Graphite

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.17 times more return on investment than Northern Graphite. However, InterContinental Hotels Group is 5.79 times less risky than Northern Graphite. It trades about -0.15 of its potential returns per unit of risk. Northern Graphite is currently generating about -0.07 per unit of risk. If you would invest  12,000  in InterContinental Hotels Group on December 26, 2024 and sell it today you would lose (1,800) from holding InterContinental Hotels Group or give up 15.0% of portfolio value over 90 days.

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

InterContinental Hotels Group  vs.  Northern Graphite

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 fragile 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.

Northern Graphite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Graphite 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with InterContinental and Northern Graphite

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

The idea behind InterContinental Hotels Group and Northern Graphite 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.