Correlation Between Intercontinental and Moodys

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

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

Diversification Opportunities for Intercontinental and Moodys

0.12

Correlation Coefficient

Intercontinental  Moodys

Average diversification

The 3 months correlation between Intercontinental and Moodys is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Intercontinental i.e., Intercontinental and Moodys go up and down completely randomly.

Pair Corralation between Intercontinental and Moodys

Considering the 90-day investment horizon Intercontinental is expected to generate 10.29 times less return on investment than Moodys. In addition to that, Intercontinental is 1.0 times more volatile than Moodys. It trades about 0.01 of its total potential returns per unit of risk. Moodys is currently generating about 0.06 per unit of volatility. If you would invest  48,111  in Moodys on September 1, 2024 and sell it today you would earn a total of  1,887  from holding Moodys or generate 3.92% return on investment over 90 days.

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

Intercontinental Exchange  vs.  Moodys

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 rather sound fundamental indicators, Intercontinental is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Moodys

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Moodys are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Intercontinental and Moodys

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

The idea behind Intercontinental Exchange and Moodys 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.