Correlation Between Computer and InterContinental

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

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

Diversification Opportunities for Computer and InterContinental

-0.89

Correlation Coefficient

Computer  InterContinental

Pay attention - limited upside

The 3 months correlation between Computer and InterContinental is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Computer And Technologies and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and Computer 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 Computer And Technologies 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 Computer i.e., Computer and InterContinental go up and down completely randomly.

Pair Corralation between Computer and InterContinental

Assuming the 90 days horizon Computer And Technologies is expected to under-perform the InterContinental. In addition to that, Computer is 1.6 times more volatile than InterContinental Hotels Group. It trades about -0.08 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.08 per unit of volatility. If you would invest  11,700  in InterContinental Hotels Group on September 26, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Computer And Technologies  vs.  InterContinental Hotels Group

Computer And Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer And Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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

Pair Trading with Computer and InterContinental

The main advantage of trading using opposite Computer and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer 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 Computer And Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.