Correlation Between Dow Jones and Icon
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Icon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Icon Group, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Icon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Icon.
Diversification Opportunities for Dow Jones and Icon
Average diversification
The 3 months correlation between Dow and Icon is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Icon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Group and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Icon go up and down completely randomly.
Pair Corralation between Dow Jones and Icon
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than Icon. However, Dow Jones Industrial is 3.16 times less risky than Icon. It trades about 0.09 of its potential returns per unit of risk. Icon Group is currently generating about -0.02 per unit of risk. If you would invest 3,351,765 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,139,300 from holding Dow Jones Industrial or generate 33.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 77.62% |
| Values | Daily Returns |
Dow Jones Industrial vs. Icon Group
Performance |
| Timeline |
Dow Jones and Icon Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Icon Group
Pair trading matchups for Icon
Pair Trading with Dow Jones and Icon
The main advantage of trading using opposite Dow Jones and Icon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Icon vs. Clal Biotechnology Industries | Icon vs. Altshuler Shaham Financial | Icon vs. Homebiogas | Icon vs. Ormat Technologies |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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