Correlation Between InterContinental and Perseus Mining

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

Diversification Opportunities for InterContinental and Perseus Mining

-0.62

Correlation Coefficient

InterContinental  Perseus Mining

Excellent diversification

The 3 months correlation between InterContinental and Perseus is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining 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 Perseus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perseus Mining has no effect on the direction of InterContinental i.e., InterContinental and Perseus Mining go up and down completely randomly.

Pair Corralation between InterContinental and Perseus Mining

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.78 times more return on investment than Perseus Mining. However, InterContinental Hotels Group is 1.29 times less risky than Perseus Mining. It trades about 0.23 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about -0.06 per unit of risk. If you would invest  10,200  in InterContinental Hotels Group on October 25, 2024 and sell it today you would earn a total of  2,300  from holding InterContinental Hotels Group or generate 22.55% return on investment over 90 days.

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

InterContinental Hotels Group  vs.  Perseus Mining Limited

InterContinental Hotels

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Perseus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perseus Mining Limited 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.

Pair Trading with InterContinental and Perseus Mining

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

The idea behind InterContinental Hotels Group and Perseus Mining Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.