Correlation Between Intercontinental and Otc Markets

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

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

Diversification Opportunities for Intercontinental and Otc Markets

-0.06

Correlation Coefficient

Intercontinental  Otc Markets

Good diversification

The 3 months correlation between Intercontinental and Otc is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and Otc Markets Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otc Markets Group 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 Otc Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otc Markets Group has no effect on the direction of Intercontinental i.e., Intercontinental and Otc Markets go up and down completely randomly.

Pair Corralation between Intercontinental and Otc Markets

Considering the 90-day investment horizon Intercontinental is expected to generate 1.26 times less return on investment than Otc Markets. In addition to that, Intercontinental is 1.18 times more volatile than Otc Markets Group. It trades about 0.12 of its total potential returns per unit of risk. Otc Markets Group is currently generating about 0.17 per unit of volatility. If you would invest  5,223  in Otc Markets Group on October 25, 2024 and sell it today you would earn a total of  167.00  from holding Otc Markets Group or generate 3.2% 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.  Otc Markets Group

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.

Otc Markets Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otc Markets Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Otc Markets may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Intercontinental and Otc Markets

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

The idea behind Intercontinental Exchange and Otc Markets Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.