Correlation Between InterContinental and TERADYNE

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

Diversification Opportunities for InterContinental and TERADYNE

-0.3

Correlation Coefficient

InterContinental  TERADYNE

Very good diversification

The 3 months correlation between InterContinental and TERADYNE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and TERADYNE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADYNE 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 TERADYNE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TERADYNE has no effect on the direction of InterContinental i.e., InterContinental and TERADYNE go up and down completely randomly.

Pair Corralation between InterContinental and TERADYNE

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.52 times more return on investment than TERADYNE. However, InterContinental Hotels Group is 1.93 times less risky than TERADYNE. It trades about 0.21 of its potential returns per unit of risk. TERADYNE is currently generating about 0.04 per unit of risk. If you would invest  10,300  in InterContinental Hotels Group on September 23, 2024 and sell it today you would earn a total of  1,700  from holding InterContinental Hotels Group or generate 16.5% return on investment over 90 days.

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

InterContinental Hotels Group  vs.  TERADYNE

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.

TERADYNE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TERADYNE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TERADYNE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with InterContinental and TERADYNE

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

The idea behind InterContinental Hotels Group and TERADYNE 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.