Correlation Between MTI Wireless and InterContinental

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

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

Diversification Opportunities for MTI Wireless and InterContinental

-0.6

Correlation Coefficient

MTI Wireless  InterContinental

Excellent diversification

The 3 months correlation between MTI and InterContinental is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and MTI Wireless 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 MTI Wireless Edge 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 MTI Wireless i.e., MTI Wireless and InterContinental go up and down completely randomly.

Pair Corralation between MTI Wireless and InterContinental

Assuming the 90 days trading horizon MTI Wireless Edge is expected to under-perform the InterContinental. In addition to that, MTI Wireless is 1.57 times more volatile than InterContinental Hotels Group. It trades about -0.06 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.29 per unit of volatility. If you would invest  805,800  in InterContinental Hotels Group on September 19, 2024 and sell it today you would earn a total of  188,400  from holding InterContinental Hotels Group or generate 23.38% return on investment over 90 days.

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

MTI Wireless Edge  vs.  InterContinental Hotels Group

MTI Wireless Edge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTI Wireless Edge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental 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

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 22 (%) 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.

Pair Trading with MTI Wireless and InterContinental

The main advantage of trading using opposite MTI Wireless and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI Wireless 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 MTI Wireless Edge 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.