Correlation Between Intercontinental and MarketAxess Holdings

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

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

Diversification Opportunities for Intercontinental and MarketAxess Holdings

-0.63

Correlation Coefficient

Intercontinental  MarketAxess Holdings

Excellent diversification

The 3 months correlation between Intercontinental and MarketAxess is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and MarketAxess Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MarketAxess Holdings 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 MarketAxess Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MarketAxess Holdings has no effect on the direction of Intercontinental i.e., Intercontinental and MarketAxess Holdings go up and down completely randomly.

Pair Corralation between Intercontinental and MarketAxess Holdings

Considering the 90-day investment horizon Intercontinental Exchange is expected to generate 0.63 times more return on investment than MarketAxess Holdings. However, Intercontinental Exchange is 1.59 times less risky than MarketAxess Holdings. It trades about 0.24 of its potential returns per unit of risk. MarketAxess Holdings is currently generating about -0.05 per unit of risk. If you would invest  14,990  in Intercontinental Exchange on December 27, 2024 and sell it today you would earn a total of  2,586  from holding Intercontinental Exchange or generate 17.25% return on investment over 90 days.

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

Intercontinental Exchange  vs.  MarketAxess Holdings

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.

MarketAxess Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days MarketAxess Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MarketAxess Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intercontinental and MarketAxess Holdings

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

The idea behind Intercontinental Exchange and MarketAxess Holdings 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.