Correlation Between LEGACY IRON and InterContinental

Can any of the company-specific risk be diversified away by investing in both LEGACY IRON and InterContinental 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 LEGACY IRON and InterContinental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LEGACY IRON ORE and InterContinental Hotels Group, you can compare the effects of market volatilities on LEGACY IRON and InterContinental 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 LEGACY IRON with a short position of InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and InterContinental.

Diversification Opportunities for LEGACY IRON and InterContinental

-0.78

Correlation Coefficient

LEGACY IRON  InterContinental

Pay attention - limited upside

The 3 months correlation between LEGACY and InterContinental is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and LEGACY IRON 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 LEGACY IRON ORE are associated (or correlated) with InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of LEGACY IRON i.e., LEGACY IRON and InterContinental go up and down completely randomly.

Pair Corralation between LEGACY IRON and InterContinental

If you would invest  11,700  in InterContinental Hotels Group on September 25, 2024 and sell it today you would earn a total of  300.00  from holding InterContinental Hotels Group or generate 2.56% return on investment over 90 days.

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

LEGACY IRON ORE  vs.  InterContinental Hotels Group

LEGACY IRON ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEGACY IRON ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

InterContinental Hotels

Risk-Adjusted Performance

16 of 100

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. Despite nearly unsteady basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LEGACY IRON and InterContinental

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

The idea behind LEGACY IRON ORE and InterContinental Hotels Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.