Correlation Between Icon Natural and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Icon Natural and Diamond Hill 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 Icon Natural and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icon Natural Resources and Diamond Hill Short, you can compare the effects of market volatilities on Icon Natural and Diamond Hill 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 Icon Natural with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Natural and Diamond Hill.
Diversification Opportunities for Icon Natural and Diamond Hill
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Icon and Diamond is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and Diamond Hill Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Short and Icon Natural 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 Icon Natural Resources are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Short has no effect on the direction of Icon Natural i.e., Icon Natural and Diamond Hill go up and down completely randomly.
Pair Corralation between Icon Natural and Diamond Hill
Assuming the 90 days horizon Icon Natural Resources is expected to generate 10.36 times more return on investment than Diamond Hill. However, Icon Natural is 10.36 times more volatile than Diamond Hill Short. It trades about 0.05 of its potential returns per unit of risk. Diamond Hill Short is currently generating about 0.31 per unit of risk. If you would invest 1,446 in Icon Natural Resources on September 12, 2024 and sell it today you would earn a total of 357.00 from holding Icon Natural Resources or generate 24.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Icon Natural Resources vs. Diamond Hill Short
Performance |
| Timeline |
| Icon Natural Resources |
| Diamond Hill Short |
Icon Natural and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icon Natural and Diamond Hill
The main advantage of trading using opposite Icon Natural and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon Natural position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| Icon Natural vs. Icon Financial Fund | Icon Natural vs. Dreyfus Natural Resources | Icon Natural vs. Icon Natural Resources | Icon Natural vs. Icon Information Technology |
| Diamond Hill vs. Icon Natural Resources | Diamond Hill vs. Firsthand Alternative Energy | Diamond Hill vs. Invesco Energy Fund | Diamond Hill vs. Goehring Rozencwajg Resources |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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