Correlation Between Barings BDC and Icon Energy

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

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

Diversification Opportunities for Barings BDC and Icon Energy

0.74

Correlation Coefficient

Barings BDC  Icon Energy

Poor diversification

The 3 months correlation between Barings and Icon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp and Barings BDC 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 Barings BDC are associated (or correlated) with Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of Barings BDC i.e., Barings BDC and Icon Energy go up and down completely randomly.

Pair Corralation between Barings BDC and Icon Energy

Given the investment horizon of 90 days Barings BDC is expected to generate 0.36 times more return on investment than Icon Energy. However, Barings BDC is 2.78 times less risky than Icon Energy. It trades about -0.23 of its potential returns per unit of risk. Icon Energy Corp is currently generating about -0.16 per unit of risk. If you would invest  986.00  in Barings BDC on October 10, 2024 and sell it today you would lose (44.00) from holding Barings BDC or give up 4.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Barings BDC  vs.  Icon Energy Corp

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Icon Energy Corp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Barings BDC and Icon Energy

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

The idea behind Barings BDC and Icon Energy Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.