Correlation Between ICON Project and STRAX
Can any of the company-specific risk be diversified away by investing in both ICON Project and STRAX 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 Project and STRAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICON Project and STRAX, you can compare the effects of market volatilities on ICON Project and STRAX 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 Project with a short position of STRAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICON Project and STRAX.
Diversification Opportunities for ICON Project and STRAX
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ICON and STRAX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ICON Project and STRAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAX and ICON Project 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 Project are associated (or correlated) with STRAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAX has no effect on the direction of ICON Project i.e., ICON Project and STRAX go up and down completely randomly.
Pair Corralation between ICON Project and STRAX
Assuming the 90 days trading horizon ICON Project is expected to generate 0.93 times more return on investment than STRAX. However, ICON Project is 1.07 times less risky than STRAX. It trades about 0.04 of its potential returns per unit of risk. STRAX is currently generating about -0.04 per unit of risk. If you would invest 17.00 in ICON Project on August 27, 2024 and sell it today you would earn a total of 2.00 from holding ICON Project or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICON Project vs. STRAX
Performance |
| Timeline |
| ICON Project |
| STRAX |
ICON Project and STRAX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICON Project and STRAX
The main advantage of trading using opposite ICON Project and STRAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICON Project position performs unexpectedly, STRAX 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 STRAX will offset losses from the drop in STRAX's long position.The idea behind ICON Project and STRAX 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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