Correlation Between Tradeweb Markets and Investcorp Europe

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

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

Diversification Opportunities for Tradeweb Markets and Investcorp Europe

-0.77

Correlation Coefficient

Tradeweb Markets  Investcorp Europe

Pay attention - limited upside

The 3 months correlation between Tradeweb and Investcorp is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tradeweb Markets and Investcorp Europe Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investcorp Europe and Tradeweb Markets 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 Tradeweb Markets are associated (or correlated) with Investcorp Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investcorp Europe has no effect on the direction of Tradeweb Markets i.e., Tradeweb Markets and Investcorp Europe go up and down completely randomly.

Pair Corralation between Tradeweb Markets and Investcorp Europe

Allowing for the 90-day total investment horizon Tradeweb Markets is expected to generate 227.19 times less return on investment than Investcorp Europe. But when comparing it to its historical volatility, Tradeweb Markets is 135.82 times less risky than Investcorp Europe. It trades about 0.1 of its potential returns per unit of risk. Investcorp Europe Acquisition is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Investcorp Europe Acquisition on September 14, 2024 and sell it today you would lose (12.99) from holding Investcorp Europe Acquisition or give up 86.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	44.61%
Values	Daily Returns

Tradeweb Markets  vs.  Investcorp Europe Acquisition

Tradeweb Markets

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Investcorp Europe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp Europe Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Investcorp Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tradeweb Markets and Investcorp Europe

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

The idea behind Tradeweb Markets and Investcorp Europe Acquisition 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.