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

-0.18

Correlation Coefficient

Intercontinental  Moodys

Good diversification

The 3 months correlation between Intercontinental and Moodys is -0.18. 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 Exchange is expected to under-perform the Moodys. But the stock apears to be less risky and, when comparing its historical volatility, Intercontinental Exchange is 1.34 times less risky than Moodys. The stock trades about -0.2 of its potential returns per unit of risk. The Moodys is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  39,092  in Moodys on January 26, 2024 and sell it today you would lose (971.00) from holding Moodys or give up 2.48% of portfolio value over 90 days.

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

Intercontinental Exchange  vs.  Moodys

Intercontinental Exchange

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intercontinental Exchange are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Intercontinental is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The current 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.