Correlation Between Intercontinental and Morningstar

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Can any of the company-specific risk be diversified away by investing in both Intercontinental and Morningstar 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 Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intercontinental Exchange and Morningstar, you can compare the effects of market volatilities on Intercontinental and Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercontinental and Morningstar.

Diversification Opportunities for Intercontinental and Morningstar

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Intercontinental and Morningstar is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar 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 Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar has no effect on the direction of Intercontinental i.e., Intercontinental and Morningstar go up and down completely randomly.

Pair Corralation between Intercontinental and Morningstar

Considering the 90-day investment horizon Intercontinental is expected to generate 1.49 times less return on investment than Morningstar. But when comparing it to its historical volatility, Intercontinental Exchange is 1.45 times less risky than Morningstar. It trades about 0.02 of its potential returns per unit of risk. Morningstar is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  27,975  in Morningstar on December 29, 2023 and sell it today you would earn a total of  2,862  from holding Morningstar or generate 10.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Intercontinental Exchange  vs.  Morningstar

 Performance 
       Timeline  
Intercontinental Exchange 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Intercontinental Exchange are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Intercontinental may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Morningstar 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Morningstar may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Intercontinental and Morningstar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Intercontinental and Morningstar

The main advantage of trading using opposite Intercontinental and Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercontinental position performs unexpectedly, Morningstar 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 Morningstar will offset losses from the drop in Morningstar's long position.
The idea behind Intercontinental Exchange and Morningstar 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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