Correlation Between InterContinental and Scientific Games

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

Diversification Opportunities for InterContinental and Scientific Games

-0.27

Correlation Coefficient

InterContinental  Scientific Games

Very good diversification

The 3 months correlation between InterContinental and Scientific is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games 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 Scientific Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games has no effect on the direction of InterContinental i.e., InterContinental and Scientific Games go up and down completely randomly.

Pair Corralation between InterContinental and Scientific Games

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.6 times more return on investment than Scientific Games. However, InterContinental Hotels Group is 1.65 times less risky than Scientific Games. It trades about 0.38 of its potential returns per unit of risk. Scientific Games is currently generating about 0.11 per unit of risk. If you would invest  10,200  in InterContinental Hotels Group on September 1, 2024 and sell it today you would earn a total of  1,600  from holding InterContinental Hotels Group or generate 15.69% 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.  Scientific Games

InterContinental Hotels

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Scientific Games

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with InterContinental and Scientific Games

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

The idea behind InterContinental Hotels Group and Scientific Games 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.