Correlation Between MSCI and Intercontinental

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

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

Diversification Opportunities for MSCI and Intercontinental

0.01

Correlation Coefficient

MSCI  Intercontinental

Significant diversification

The 3 months correlation between MSCI and Intercontinental is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange and MSCI 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 MSCI Inc 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 MSCI i.e., MSCI and Intercontinental go up and down completely randomly.

Pair Corralation between MSCI and Intercontinental

Given the investment horizon of 90 days MSCI Inc is expected to under-perform the Intercontinental. In addition to that, MSCI is 4.47 times more volatile than Intercontinental Exchange. It trades about -0.18 of its total potential returns per unit of risk. Intercontinental Exchange is currently generating about -0.24 per unit of volatility. If you would invest  13,703  in Intercontinental Exchange on January 30, 2024 and sell it today you would lose (533.00) from holding Intercontinental Exchange or give up 3.89% of portfolio value over 90 days.

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

MSCI Inc  vs.  Intercontinental Exchange

MSCI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSCI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Intercontinental Exchange

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intercontinental Exchange are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MSCI and Intercontinental

The main advantage of trading using opposite MSCI and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI 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 MSCI Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.