Correlation Between London Stock and Intercontinental
Can any of the company-specific risk be diversified away by investing in both London Stock 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 London Stock and Intercontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Stock Exchange and Intercontinental Exchange, you can compare the effects of market volatilities on London Stock 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 London Stock with a short position of Intercontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Stock and Intercontinental.
Diversification Opportunities for London Stock and Intercontinental
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between London and Intercontinental is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange and London Stock 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 London Stock Exchange 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 London Stock i.e., London Stock and Intercontinental go up and down completely randomly.
Pair Corralation between London Stock and Intercontinental
Assuming the 90 days trading horizon London Stock Exchange is expected to generate 1.58 times more return on investment than Intercontinental. However, London Stock is 1.58 times more volatile than Intercontinental Exchange. It trades about 0.05 of its potential returns per unit of risk. Intercontinental Exchange is currently generating about 0.07 per unit of risk. If you would invest 13,300 in London Stock Exchange on September 12, 2024 and sell it today you would earn a total of 200.00 from holding London Stock Exchange or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Stock Exchange vs. Intercontinental Exchange
Performance |
| Timeline |
| London Stock Exchange |
| Intercontinental Exchange |
London Stock and Intercontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Stock and Intercontinental
The main advantage of trading using opposite London Stock and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Stock 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.| London Stock vs. SMA Solar Technology | London Stock vs. Highlight Communications AG | London Stock vs. Ribbon Communications | London Stock vs. Singapore Telecommunications Limited |
| Intercontinental vs. Bumrungrad Hospital Public | Intercontinental vs. Virtus Investment Partners | Intercontinental vs. DiamondRock Hospitality | Intercontinental vs. YOOMA WELLNESS INC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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