Correlation Between InterContinental and Systemair

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

Diversification Opportunities for InterContinental and Systemair

0.81

Correlation Coefficient

InterContinental  Systemair

Very poor diversification

The 3 months correlation between InterContinental and Systemair is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Systemair AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Systemair AB 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 Systemair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Systemair AB has no effect on the direction of InterContinental i.e., InterContinental and Systemair go up and down completely randomly.

Pair Corralation between InterContinental and Systemair

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.71 times more return on investment than Systemair. However, InterContinental Hotels Group is 1.41 times less risky than Systemair. It trades about -0.02 of its potential returns per unit of risk. Systemair AB is currently generating about -0.53 per unit of risk. If you would invest  991,800  in InterContinental Hotels Group on October 12, 2024 and sell it today you would lose (3,000) from holding InterContinental Hotels Group or give up 0.3% of portfolio value over 90 days.

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

InterContinental Hotels Group  vs.  Systemair AB

InterContinental Hotels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, InterContinental exhibited solid returns over the last few months and may actually be approaching a breakup point.

Systemair AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Systemair AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Systemair is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with InterContinental and Systemair

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

The idea behind InterContinental Hotels Group and Systemair AB 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.