Correlation Between InterContinental and VITEC SOFTWARE

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Can any of the company-specific risk be diversified away by investing in both InterContinental and VITEC SOFTWARE 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 VITEC SOFTWARE 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 VITEC SOFTWARE GROUP, you can compare the effects of market volatilities on InterContinental and VITEC SOFTWARE 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 VITEC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and VITEC SOFTWARE.

Diversification Opportunities for InterContinental and VITEC SOFTWARE

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between InterContinental and VITEC is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE GROUP 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 VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of InterContinental i.e., InterContinental and VITEC SOFTWARE go up and down completely randomly.

Pair Corralation between InterContinental and VITEC SOFTWARE

Assuming the 90 days trading horizon InterContinental is expected to generate 1.83 times less return on investment than VITEC SOFTWARE. In addition to that, InterContinental is 1.12 times more volatile than VITEC SOFTWARE GROUP. It trades about 0.17 of its total potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about 0.36 per unit of volatility. If you would invest  3,984  in VITEC SOFTWARE GROUP on September 20, 2024 and sell it today you would earn a total of  472.00  from holding VITEC SOFTWARE GROUP or generate 11.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

InterContinental Hotels Group  vs.  VITEC SOFTWARE GROUP

 Performance 
       Timeline  
InterContinental Hotels 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.
VITEC SOFTWARE GROUP 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days VITEC SOFTWARE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VITEC SOFTWARE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

InterContinental and VITEC SOFTWARE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with InterContinental and VITEC SOFTWARE

The main advantage of trading using opposite InterContinental and VITEC SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, VITEC SOFTWARE 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 VITEC SOFTWARE will offset losses from the drop in VITEC SOFTWARE's long position.
The idea behind InterContinental Hotels Group and VITEC SOFTWARE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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