Correlation Between Intercontinental and Alphabet
Can any of the company-specific risk be diversified away by investing in both Intercontinental and Alphabet 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 Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intercontinental Exchange and Alphabet Inc Class C, you can compare the effects of market volatilities on Intercontinental and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intercontinental and Alphabet.
Diversification Opportunities for Intercontinental and Alphabet
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Intercontinental and Alphabet is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of Intercontinental i.e., Intercontinental and Alphabet go up and down completely randomly.
Pair Corralation between Intercontinental and Alphabet
Considering the 90-day investment horizon Intercontinental is expected to generate 2.05 times less return on investment than Alphabet. But when comparing it to its historical volatility, Intercontinental Exchange is 1.54 times less risky than Alphabet. It trades about 0.09 of its potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,030 in Alphabet Inc Class C on January 24, 2024 and sell it today you would earn a total of 6,765 from holding Alphabet Inc Class C or generate 74.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Intercontinental Exchange vs. Alphabet Inc Class C
Performance |
Timeline |
Intercontinental Exchange |
Alphabet Class C |
Intercontinental and Alphabet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Intercontinental and Alphabet
The main advantage of trading using opposite Intercontinental and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercontinental position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet'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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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