Correlation Between Icon and Dan Hotels

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

By analyzing existing cross correlation between Icon Group and Dan Hotels, you can compare the effects of market volatilities on Icon and Dan Hotels 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 Dan Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon and Dan Hotels.

Diversification Opportunities for Icon and Dan Hotels

-0.47

Correlation Coefficient

Icon  Dan Hotels

Very good diversification

The 3 months correlation between Icon and Dan is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Icon Group and Dan Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dan Hotels 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 Dan Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dan Hotels has no effect on the direction of Icon i.e., Icon and Dan Hotels go up and down completely randomly.

Pair Corralation between Icon and Dan Hotels

Assuming the 90 days trading horizon Icon Group is expected to under-perform the Dan Hotels. In addition to that, Icon is 1.1 times more volatile than Dan Hotels. It trades about -0.01 of its total potential returns per unit of risk. Dan Hotels is currently generating about 0.18 per unit of volatility. If you would invest  228,100  in Dan Hotels on September 15, 2024 and sell it today you would earn a total of  17,000  from holding Dan Hotels or generate 7.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Icon Group  vs.  Dan Hotels

Icon Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Icon sustained solid returns over the last few months and may actually be approaching a breakup point.

Dan Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dan Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dan Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Icon and Dan Hotels

The main advantage of trading using opposite Icon and Dan Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon position performs unexpectedly, Dan Hotels 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 Dan Hotels will offset losses from the drop in Dan Hotels' long position.

The idea behind Icon Group and Dan Hotels 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..