Correlation Between Morningstar and Intercontinental

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

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

Diversification Opportunities for Morningstar and Intercontinental

-0.23

Correlation Coefficient

Morningstar  Intercontinental

Very good diversification

The 3 months correlation between Morningstar and Intercontinental is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange and Morningstar 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 Morningstar 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 Morningstar i.e., Morningstar and Intercontinental go up and down completely randomly.

Pair Corralation between Morningstar and Intercontinental

Given the investment horizon of 90 days Morningstar is expected to generate 1.17 times more return on investment than Intercontinental. However, Morningstar is 1.17 times more volatile than Intercontinental Exchange. It trades about 0.06 of its potential returns per unit of risk. Intercontinental Exchange is currently generating about -0.07 per unit of risk. If you would invest  32,041  in Morningstar on September 19, 2024 and sell it today you would earn a total of  1,709  from holding Morningstar or generate 5.33% return on investment over 90 days.

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

Morningstar  vs.  Intercontinental Exchange

Morningstar

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Morningstar is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the 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 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.

Pair Trading with Morningstar and Intercontinental

The main advantage of trading using opposite Morningstar and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar 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 Morningstar 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.