Correlation Between Intercontinental and Cboe Global

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

By analyzing existing cross correlation between Intercontinental Exchange and Cboe Global Markets, you can compare the effects of market volatilities on Intercontinental and Cboe Global 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 Cboe Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercontinental and Cboe Global.

Diversification Opportunities for Intercontinental and Cboe Global

0.95

Correlation Coefficient

Intercontinental  Cboe Global

Almost no diversification

The 3 months correlation between Intercontinental and Cboe is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and Cboe Global Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Global Markets 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 Exchange are associated (or correlated) with Cboe Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Global Markets has no effect on the direction of Intercontinental i.e., Intercontinental and Cboe Global go up and down completely randomly.

Pair Corralation between Intercontinental and Cboe Global

Considering the 90-day investment horizon Intercontinental Exchange is expected to generate 0.8 times more return on investment than Cboe Global. However, Intercontinental Exchange is 1.25 times less risky than Cboe Global. It trades about 0.23 of its potential returns per unit of risk. Cboe Global Markets is currently generating about 0.16 per unit of risk. If you would invest  14,895  in Intercontinental Exchange on December 30, 2024 and sell it today you would earn a total of  2,576  from holding Intercontinental Exchange or generate 17.29% return on investment over 90 days.

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

Intercontinental Exchange  vs.  Cboe Global Markets

Intercontinental Exchange

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intercontinental Exchange are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Intercontinental exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cboe Global Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cboe Global Markets are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cboe Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intercontinental and Cboe Global

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

The idea behind Intercontinental Exchange and Cboe Global Markets 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..