Correlation Between InterContinental and Dalata Hotel

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

Diversification Opportunities for InterContinental and Dalata Hotel

0.69

Correlation Coefficient

InterContinental  Dalata Hotel

Poor diversification

The 3 months correlation between InterContinental and Dalata is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group 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 Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of InterContinental i.e., InterContinental and Dalata Hotel go up and down completely randomly.

Pair Corralation between InterContinental and Dalata Hotel

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.65 times more return on investment than Dalata Hotel. However, InterContinental Hotels Group is 1.54 times less risky than Dalata Hotel. It trades about 0.59 of its potential returns per unit of risk. Dalata Hotel Group is currently generating about 0.17 per unit of risk. If you would invest  847,400  in InterContinental Hotels Group on September 5, 2024 and sell it today you would earn a total of  153,100  from holding InterContinental Hotels Group or generate 18.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

InterContinental Hotels Group  vs.  Dalata Hotel Group

InterContinental Hotels

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 32 (%) 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.

Dalata Hotel Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Dalata Hotel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with InterContinental and Dalata Hotel

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

The idea behind InterContinental Hotels Group and Dalata Hotel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.