Correlation Between Cronos and ICON Project

Can any of the company-specific risk be diversified away by investing in both Cronos 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 Cronos and ICON Project into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cronos and ICON Project, you can compare the effects of market volatilities on Cronos 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 Cronos with a short position of ICON Project. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and ICON Project.

Diversification Opportunities for Cronos and ICON Project

0.83

Correlation Coefficient

Cronos  ICON Project

Very poor diversification

The 3 months correlation between Cronos and ICON is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and ICON Project in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON Project and Cronos 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 Cronos 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 Cronos i.e., Cronos and ICON Project go up and down completely randomly.

Pair Corralation between Cronos and ICON Project

Assuming the 90 days trading horizon Cronos is expected to generate 0.88 times more return on investment than ICON Project. However, Cronos is 1.13 times less risky than ICON Project. It trades about -0.11 of its potential returns per unit of risk. ICON Project is currently generating about -0.23 per unit of risk. If you would invest  14.00  in Cronos on February 2, 2024 and sell it today you would lose (2.00) from holding Cronos or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Cronos  vs.  ICON Project

Cronos

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

ICON Project

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICON Project are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ICON Project may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Cronos and ICON Project

The main advantage of trading using opposite Cronos and ICON Project positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cronos 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 Cronos 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.