Correlation Between Icon and Discount Investment
Can any of the company-specific risk be diversified away by investing in both Icon and Discount Investment 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 and Discount Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icon Group and Discount Investment Corp, you can compare the effects of market volatilities on Icon and Discount Investment 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 with a short position of Discount Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon and Discount Investment.
Diversification Opportunities for Icon and Discount Investment
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Icon and Discount is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Icon Group and Discount Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discount Investment Corp and Icon 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 Group are associated (or correlated) with Discount Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discount Investment Corp has no effect on the direction of Icon i.e., Icon and Discount Investment go up and down completely randomly.
Pair Corralation between Icon and Discount Investment
Assuming the 90 days trading horizon Icon is expected to generate 4.12 times less return on investment than Discount Investment. But when comparing it to its historical volatility, Icon Group is 1.37 times less risky than Discount Investment. It trades about 0.02 of its potential returns per unit of risk. Discount Investment Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 35,400 in Discount Investment Corp on August 24, 2024 and sell it today you would earn a total of 12,470 from holding Discount Investment Corp or generate 35.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Icon Group vs. Discount Investment Corp
Performance |
| Timeline |
| Icon Group |
| Discount Investment Corp |
Icon and Discount Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icon and Discount Investment
The main advantage of trading using opposite Icon and Discount Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon position performs unexpectedly, Discount Investment 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 Discount Investment will offset losses from the drop in Discount Investment's long position.| Icon vs. Gilat Telecom Global | Icon vs. Retailors | Icon vs. Batm Advanced Communications | Icon vs. Clal Biotechnology Industries |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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