Correlation Between SP Global and Moodys

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

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

Diversification Opportunities for SP Global and Moodys

0.68

Correlation Coefficient

SP Global  Moodys

Poor diversification

The 3 months correlation between SPGI and Moodys is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys and SP Global 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 SP Global 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 SP Global i.e., SP Global and Moodys go up and down completely randomly.

Pair Corralation between SP Global and Moodys

Given the investment horizon of 90 days SP Global is expected to generate 1.17 times less return on investment than Moodys. But when comparing it to its historical volatility, SP Global is 1.11 times less risky than Moodys. It trades about 0.04 of its potential returns per unit of risk. Moodys is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  27,970  in Moodys on January 30, 2024 and sell it today you would earn a total of  9,643  from holding Moodys or generate 34.48% return on investment over 90 days.

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

SP Global  vs.  Moodys

SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 SP Global and Moodys

The main advantage of trading using opposite SP Global and Moodys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global 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 SP Global 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 Transaction History module to view history of all your transactions and understand their impact on performance.