Correlation Between Euronext and Intercontinental

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

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

Diversification Opportunities for Euronext and Intercontinental

-0.16

Correlation Coefficient

Euronext  Intercontinental

Good diversification

The 3 months correlation between Euronext and Intercontinental is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange and Euronext 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 Euronext NV 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 Exchange has no effect on the direction of Euronext i.e., Euronext and Intercontinental go up and down completely randomly.

Pair Corralation between Euronext and Intercontinental

Assuming the 90 days horizon Euronext NV is expected to generate 0.81 times more return on investment than Intercontinental. However, Euronext NV is 1.23 times less risky than Intercontinental. It trades about -0.01 of its potential returns per unit of risk. Intercontinental Exchange is currently generating about -0.12 per unit of risk. If you would invest  11,200  in Euronext NV on October 10, 2024 and sell it today you would lose (100.00) from holding Euronext NV or give up 0.89% of portfolio value over 90 days.

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

Euronext NV  vs.  Intercontinental Exchange

Euronext NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euronext NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Euronext is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Intercontinental Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intercontinental Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Euronext and Intercontinental

The main advantage of trading using opposite Euronext and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euronext 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 Euronext NV and Intercontinental Exchange 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.