Correlation Between Direct Capital and Icon
Can any of the company-specific risk be diversified away by investing in both Direct Capital and Icon 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 Direct Capital and Icon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Capital Investments and Icon Group, you can compare the effects of market volatilities on Direct Capital and Icon 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 Direct Capital with a short position of Icon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Capital and Icon.
Diversification Opportunities for Direct Capital and Icon
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direct and Icon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Direct Capital Investments and Icon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Group and Direct Capital 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 Direct Capital Investments are associated (or correlated) with Icon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Group has no effect on the direction of Direct Capital i.e., Direct Capital and Icon go up and down completely randomly.
Pair Corralation between Direct Capital and Icon
Assuming the 90 days trading horizon Direct Capital Investments is expected to under-perform the Icon. In addition to that, Direct Capital is 5.14 times more volatile than Icon Group. It trades about -0.21 of its total potential returns per unit of risk. Icon Group is currently generating about -0.11 per unit of volatility. If you would invest 43,720 in Icon Group on August 28, 2024 and sell it today you would lose (2,040) from holding Icon Group or give up 4.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Capital Investments vs. Icon Group
Performance |
| Timeline |
| Direct Capital Inves |
| Icon Group |
Direct Capital and Icon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Capital and Icon
The main advantage of trading using opposite Direct Capital and Icon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Capital position performs unexpectedly, Icon 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 Icon will offset losses from the drop in Icon's long position.| Direct Capital vs. Nice | Direct Capital vs. The Gold Bond | Direct Capital vs. Bank Leumi Le Israel | Direct Capital vs. ICL Israel Chemicals |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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