Correlation Between InterContinental and Accor SA

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

Diversification Opportunities for InterContinental and Accor SA

0.79

Correlation Coefficient

InterContinental  Accor SA

Poor diversification

The 3 months correlation between InterContinental and Accor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Accor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accor 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 Accor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accor SA has no effect on the direction of InterContinental i.e., InterContinental and Accor SA go up and down completely randomly.

Pair Corralation between InterContinental and Accor SA

Assuming the 90 days horizon InterContinental Hotels Group is expected to under-perform the Accor SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, InterContinental Hotels Group is 1.5 times less risky than Accor SA. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Accor SA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  936.00  in Accor SA on January 25, 2024 and sell it today you would lose (30.00) from holding Accor SA or give up 3.21% of portfolio value over 90 days.

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

InterContinental Hotels Group  vs.  Accor SA

InterContinental Hotels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, InterContinental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Accor SA

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Accor SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Accor SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InterContinental and Accor SA

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

The idea behind InterContinental Hotels Group and Accor 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.