Correlation Between MarketAxess Holdings and Intercontinental

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

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

Diversification Opportunities for MarketAxess Holdings and Intercontinental

0.87

Correlation Coefficient

MarketAxess Holdings  Intercontinental

Very poor diversification

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

Pair Corralation between MarketAxess Holdings and Intercontinental

Given the investment horizon of 90 days MarketAxess Holdings is expected to under-perform the Intercontinental. But the stock apears to be less risky and, when comparing its historical volatility, MarketAxess Holdings is 1.01 times less risky than Intercontinental. The stock trades about -0.35 of its potential returns per unit of risk. The Intercontinental Exchange is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  16,452  in Intercontinental Exchange on October 23, 2024 and sell it today you would lose (1,541) from holding Intercontinental Exchange or give up 9.37% of portfolio value over 90 days.

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

MarketAxess Holdings  vs.  Intercontinental Exchange

MarketAxess Holdings

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with MarketAxess Holdings and Intercontinental

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

The idea behind MarketAxess Holdings and Intercontinental Exchange 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.