Correlation Between Intercontinental and MSCI

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

Diversification Opportunities for Intercontinental and MSCI

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Intercontinental and MSCI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of Intercontinental i.e., Intercontinental and MSCI go up and down completely randomly.

Pair Corralation between Intercontinental and MSCI

Considering the 90-day investment horizon Intercontinental is expected to generate 1.8 times less return on investment than MSCI. But when comparing it to its historical volatility, Intercontinental Exchange is 1.46 times less risky than MSCI. It trades about 0.02 of its potential returns per unit of risk. MSCI Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  47,587  in MSCI Inc on December 30, 2023 and sell it today you would earn a total of  8,458  from holding MSCI Inc or generate 17.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Intercontinental Exchange  vs.  MSCI Inc

 Performance 
       Timeline  
Intercontinental Exchange 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Intercontinental Exchange are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Intercontinental may actually be approaching a critical reversion point that can send shares even higher in April 2024.
MSCI Inc 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in MSCI Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, MSCI is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Intercontinental and MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Intercontinental and MSCI

The main advantage of trading using opposite Intercontinental and MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercontinental position performs unexpectedly, MSCI 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 MSCI will offset losses from the drop in MSCI's long position.
The idea behind Intercontinental Exchange and MSCI Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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