Correlation Between Tezos and ICON Project
Can any of the company-specific risk be diversified away by investing in both Tezos and ICON Project 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 Tezos and ICON Project into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tezos and ICON Project, you can compare the effects of market volatilities on Tezos and ICON Project 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 Tezos with a short position of ICON Project. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tezos and ICON Project.
Diversification Opportunities for Tezos and ICON Project
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tezos and ICON is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tezos and ICON Project in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON Project and Tezos 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 Tezos are associated (or correlated) with ICON Project. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON Project has no effect on the direction of Tezos i.e., Tezos and ICON Project go up and down completely randomly.
Pair Corralation between Tezos and ICON Project
Assuming the 90 days trading horizon Tezos is expected to generate 0.65 times more return on investment than ICON Project. However, Tezos is 1.54 times less risky than ICON Project. It trades about -0.18 of its potential returns per unit of risk. ICON Project is currently generating about -0.12 per unit of risk. If you would invest 125.00 in Tezos on January 20, 2024 and sell it today you would lose (27.00) from holding Tezos or give up 21.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tezos vs. ICON Project
Performance |
| Timeline |
| Tezos |
| ICON Project |
Tezos and ICON Project Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tezos and ICON Project
The main advantage of trading using opposite Tezos and ICON Project positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tezos position performs unexpectedly, ICON Project 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 Project will offset losses from the drop in ICON Project's long position.The idea behind Tezos and ICON Project 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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