Correlation Between INTERCONT HOTELS and Intel

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

By analyzing existing cross correlation between INTERCONT HOTELS and Intel, you can compare the effects of market volatilities on INTERCONT HOTELS and Intel 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 INTERCONT HOTELS with a short position of Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERCONT HOTELS and Intel.

Diversification Opportunities for INTERCONT HOTELS and Intel

0.6

Correlation Coefficient

INTERCONT HOTELS  Intel

Poor diversification

The 3 months correlation between INTERCONT and Intel is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding INTERCONT HOTELS and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel and INTERCONT HOTELS 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 INTERCONT HOTELS are associated (or correlated) with Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of INTERCONT HOTELS i.e., INTERCONT HOTELS and Intel go up and down completely randomly.

Pair Corralation between INTERCONT HOTELS and Intel

Assuming the 90 days trading horizon INTERCONT HOTELS is expected to generate 0.56 times more return on investment than Intel. However, INTERCONT HOTELS is 1.79 times less risky than Intel. It trades about 0.27 of its potential returns per unit of risk. Intel is currently generating about 0.06 per unit of risk. If you would invest  9,050  in INTERCONT HOTELS on September 12, 2024 and sell it today you would earn a total of  3,350  from holding INTERCONT HOTELS or generate 37.02% return on investment over 90 days.

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

INTERCONT HOTELS  vs.  Intel

INTERCONT HOTELS

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INTERCONT HOTELS are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, INTERCONT HOTELS reported solid returns over the last few months and may actually be approaching a breakup point.

Intel

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with INTERCONT HOTELS and Intel

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

The idea behind INTERCONT HOTELS and Intel 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.