Correlation Between Compound Governance and ICON Project

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

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

Diversification Opportunities for Compound Governance and ICON Project

0.84

Correlation Coefficient

Compound Governance  ICON Project

Very poor diversification

The 3 months correlation between Compound and ICON is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Compound Governance Token and ICON Project in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON Project and Compound Governance 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 Compound Governance Token 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 Compound Governance i.e., Compound Governance and ICON Project go up and down completely randomly.

Pair Corralation between Compound Governance and ICON Project

Assuming the 90 days trading horizon Compound Governance Token is expected to generate 0.84 times more return on investment than ICON Project. However, Compound Governance Token is 1.2 times less risky than ICON Project. It trades about -0.21 of its potential returns per unit of risk. ICON Project is currently generating about -0.24 per unit of risk. If you would invest  7,917  in Compound Governance Token on January 24, 2024 and sell it today you would lose (1,994) from holding Compound Governance Token or give up 25.19% of portfolio value over 90 days.

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

Compound Governance Token  vs.  ICON Project

Compound Governance Token

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compound Governance Token are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Compound Governance exhibited solid returns over the last few months and may actually be approaching a breakup point.

ICON Project

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICON Project are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ICON Project exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compound Governance and ICON Project

The main advantage of trading using opposite Compound Governance and ICON Project positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compound Governance 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 Compound Governance Token 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 Global Correlations module to find global opportunities by holding instruments from different markets.