Correlation Between ICON Project and BCD
Can any of the company-specific risk be diversified away by investing in both ICON Project and BCD 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 BCD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICON Project and BCD, you can compare the effects of market volatilities on ICON Project and BCD 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 BCD. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICON Project and BCD.
Diversification Opportunities for ICON Project and BCD
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ICON and BCD is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ICON Project and BCD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCD 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 BCD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCD has no effect on the direction of ICON Project i.e., ICON Project and BCD go up and down completely randomly.
Pair Corralation between ICON Project and BCD
Assuming the 90 days trading horizon ICON Project is expected to under-perform the BCD. In addition to that, ICON Project is 1.27 times more volatile than BCD. It trades about -0.13 of its total potential returns per unit of risk. BCD is currently generating about -0.09 per unit of volatility. If you would invest 13.00 in BCD on January 20, 2024 and sell it today you would lose (2.00) from holding BCD or give up 15.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICON Project vs. BCD
Performance |
| Timeline |
| ICON Project |
| BCD |
ICON Project and BCD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICON Project and BCD
The main advantage of trading using opposite ICON Project and BCD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICON Project position performs unexpectedly, BCD 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 BCD will offset losses from the drop in BCD's long position.The idea behind ICON Project and BCD 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |