Correlation Between InterContinental and Axway Software

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

Diversification Opportunities for InterContinental and Axway Software

0.92

Correlation Coefficient

InterContinental  Axway Software

Almost no diversification

The 3 months correlation between InterContinental and Axway is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA 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 Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of InterContinental i.e., InterContinental and Axway Software go up and down completely randomly.

Pair Corralation between InterContinental and Axway Software

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.88 times more return on investment than Axway Software. However, InterContinental Hotels Group is 1.13 times less risky than Axway Software. It trades about 0.36 of its potential returns per unit of risk. Axway Software SA is currently generating about 0.25 per unit of risk. If you would invest  761,600  in InterContinental Hotels Group on September 3, 2024 and sell it today you would earn a total of  218,400  from holding InterContinental Hotels Group or generate 28.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.92%
Values	Daily Returns

InterContinental Hotels Group  vs.  Axway Software SA

InterContinental Hotels

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 28 (%) 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.

Axway Software SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InterContinental and Axway Software

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

The idea behind InterContinental Hotels Group and Axway Software SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.