Correlation Between InterContinental and Corporate Office

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

Diversification Opportunities for InterContinental and Corporate Office

0.72

Correlation Coefficient

InterContinental  Corporate Office

Poor diversification

The 3 months correlation between InterContinental and Corporate is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of InterContinental i.e., InterContinental and Corporate Office go up and down completely randomly.

Pair Corralation between InterContinental and Corporate Office

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.92 times more return on investment than Corporate Office. However, InterContinental Hotels Group is 1.09 times less risky than Corporate Office. It trades about 0.12 of its potential returns per unit of risk. Corporate Office Properties is currently generating about 0.06 per unit of risk. If you would invest  5,812  in InterContinental Hotels Group on October 5, 2024 and sell it today you would earn a total of  6,288  from holding InterContinental Hotels Group or generate 108.19% return on investment over 90 days.

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

InterContinental Hotels Group  vs.  Corporate Office Properties

InterContinental Hotels

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days InterContinental Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Corporate Office Pro

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Corporate Office 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 Corporate Office

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

The idea behind InterContinental Hotels Group and Corporate Office Properties 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.