Correlation Between InterContinental and Integrated Diagnostics

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

Diversification Opportunities for InterContinental and Integrated Diagnostics

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between InterContinental and Integrated is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Integrated Diagnostics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Diagnostics 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 Integrated Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Diagnostics has no effect on the direction of InterContinental i.e., InterContinental and Integrated Diagnostics go up and down completely randomly.

Pair Corralation between InterContinental and Integrated Diagnostics

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.26 times more return on investment than Integrated Diagnostics. However, InterContinental Hotels Group is 3.79 times less risky than Integrated Diagnostics. It trades about 0.16 of its potential returns per unit of risk. Integrated Diagnostics Holdings is currently generating about 0.02 per unit of risk. If you would invest  925,800  in InterContinental Hotels Group on October 9, 2024 and sell it today you would earn a total of  54,600  from holding InterContinental Hotels Group or generate 5.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

InterContinental Hotels Group  vs.  Integrated Diagnostics Holding

 Performance 
       Timeline  
InterContinental Hotels 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, InterContinental exhibited solid returns over the last few months and may actually be approaching a breakup point.
Integrated Diagnostics 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Diagnostics Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Integrated Diagnostics unveiled solid returns over the last few months and may actually be approaching a breakup point.

InterContinental and Integrated Diagnostics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with InterContinental and Integrated Diagnostics

The main advantage of trading using opposite InterContinental and Integrated Diagnostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental position performs unexpectedly, Integrated Diagnostics 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 Integrated Diagnostics will offset losses from the drop in Integrated Diagnostics' long position.
The idea behind InterContinental Hotels Group and Integrated Diagnostics Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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