Correlation Between Intercontinental and London Stock
Can any of the company-specific risk be diversified away by investing in both Intercontinental and London Stock 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 London Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intercontinental Exchange and London Stock Exchange, you can compare the effects of market volatilities on Intercontinental and London Stock 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 London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercontinental and London Stock.
Diversification Opportunities for Intercontinental and London Stock
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Intercontinental and London is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange 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 London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of Intercontinental i.e., Intercontinental and London Stock go up and down completely randomly.
Pair Corralation between Intercontinental and London Stock
Considering the 90-day investment horizon Intercontinental is expected to generate 1.26 times less return on investment than London Stock. But when comparing it to its historical volatility, Intercontinental Exchange is 1.47 times less risky than London Stock. It trades about 0.13 of its potential returns per unit of risk. London Stock Exchange is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 11,901 in London Stock Exchange on September 8, 2024 and sell it today you would earn a total of 2,539 from holding London Stock Exchange or generate 21.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Intercontinental Exchange vs. London Stock Exchange
Performance |
Timeline |
Intercontinental Exchange |
London Stock Exchange |
Intercontinental and London Stock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Intercontinental and London Stock
The main advantage of trading using opposite Intercontinental and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercontinental position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock's long position.Intercontinental vs. Nasdaq Inc | Intercontinental vs. SP Global | Intercontinental vs. Moodys | Intercontinental vs. FactSet Research Systems |
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Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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