Correlation Between Intercontinental and ASX Limited
Can any of the company-specific risk be diversified away by investing in both Intercontinental and ASX Limited 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 ASX Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intercontinental Exchange and ASX Limited ADR, you can compare the effects of market volatilities on Intercontinental and ASX Limited 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 ASX Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercontinental and ASX Limited.
Diversification Opportunities for Intercontinental and ASX Limited
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Intercontinental and ASX is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and ASX Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited ADR 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 ASX Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited ADR has no effect on the direction of Intercontinental i.e., Intercontinental and ASX Limited go up and down completely randomly.
Pair Corralation between Intercontinental and ASX Limited
Considering the 90-day investment horizon Intercontinental Exchange is expected to generate 0.94 times more return on investment than ASX Limited. However, Intercontinental Exchange is 1.07 times less risky than ASX Limited. It trades about -0.19 of its potential returns per unit of risk. ASX Limited ADR is currently generating about -0.48 per unit of risk. If you would invest 13,610 in Intercontinental Exchange on January 20, 2024 and sell it today you would lose (512.00) from holding Intercontinental Exchange or give up 3.76% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Intercontinental Exchange vs. ASX Limited ADR
Performance |
Timeline |
Intercontinental Exchange |
ASX Limited ADR |
Intercontinental and ASX Limited Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Intercontinental and ASX Limited
The main advantage of trading using opposite Intercontinental and ASX Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercontinental position performs unexpectedly, ASX Limited 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 ASX Limited will offset losses from the drop in ASX Limited's long position.Intercontinental vs. Nasdaq Inc | Intercontinental vs. SP Global | Intercontinental vs. Moodys | Intercontinental vs. FactSet Research Systems |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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