Correlation Between DIA and ICON Project
Can any of the company-specific risk be diversified away by investing in both DIA and ICON Project 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 DIA and ICON Project into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIA and ICON Project, you can compare the effects of market volatilities on DIA and ICON Project 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 DIA with a short position of ICON Project. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIA and ICON Project.
Diversification Opportunities for DIA and ICON Project
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between DIA and ICON is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding DIA and ICON Project in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON Project and DIA 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 DIA are associated (or correlated) with ICON Project. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON Project has no effect on the direction of DIA i.e., DIA and ICON Project go up and down completely randomly.
Pair Corralation between DIA and ICON Project
Assuming the 90 days trading horizon DIA is expected to under-perform the ICON Project. In addition to that, DIA is 1.04 times more volatile than ICON Project. It trades about -0.18 of its total potential returns per unit of risk. ICON Project is currently generating about 0.3 per unit of volatility. If you would invest 14.00 in ICON Project on August 27, 2024 and sell it today you would earn a total of 5.00 from holding ICON Project or generate 35.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DIA vs. ICON Project
Performance |
| Timeline |
| DIA |
| ICON Project |
DIA and ICON Project Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIA and ICON Project
The main advantage of trading using opposite DIA and ICON Project positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIA position performs unexpectedly, ICON Project 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 Project will offset losses from the drop in ICON Project's long position.The idea behind DIA and ICON Project 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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