Correlation Between Intercontinental and SP Global

Can any of the company-specific risk be diversified away by investing in both Intercontinental and SP 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 SP 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 SP Global, you can compare the effects of market volatilities on Intercontinental and SP 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 SP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercontinental and SP Global.

Diversification Opportunities for Intercontinental and SP Global

0.87

Correlation Coefficient

Intercontinental  SP Global

Very poor diversification

The 3 months correlation between Intercontinental and SPGI is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of Intercontinental i.e., Intercontinental and SP Global go up and down completely randomly.

Pair Corralation between Intercontinental and SP Global

Considering the 90-day investment horizon Intercontinental Exchange is expected to generate 1.02 times more return on investment than SP Global. However, Intercontinental is 1.02 times more volatile than SP Global. It trades about 0.1 of its potential returns per unit of risk. SP Global is currently generating about 0.04 per unit of risk. If you would invest  16,049  in Intercontinental Exchange on November 28, 2024 and sell it today you would earn a total of  1,072  from holding Intercontinental Exchange or generate 6.68% return on investment over 90 days.

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

Intercontinental Exchange  vs.  SP Global

Intercontinental Exchange

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intercontinental Exchange are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Intercontinental may actually be approaching a critical reversion point that can send shares even higher in March 2025.

SP Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SP Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, SP Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Intercontinental and SP Global

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

The idea behind Intercontinental Exchange and SP Global 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.