Correlation Between Diana Shipping and Icon Energy

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

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

Diversification Opportunities for Diana Shipping and Icon Energy

-0.73

Correlation Coefficient

Diana Shipping  Icon Energy

Pay attention - limited upside

The 3 months correlation between Diana and Icon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Diana Shipping 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 Diana Shipping 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 Diana Shipping 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 Diana Shipping i.e., Diana Shipping and Icon Energy go up and down completely randomly.

Pair Corralation between Diana Shipping and Icon Energy

Assuming the 90 days trading horizon Diana Shipping is expected to generate 3.7 times less return on investment than Icon Energy. But when comparing it to its historical volatility, Diana Shipping is 5.34 times less risky than Icon Energy. It trades about 0.04 of its potential returns per unit of risk. Icon Energy Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Icon Energy Corp on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Icon Energy Corp or generate 2.51% return on investment over 90 days.

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

Diana Shipping  vs.  Icon Energy Corp

Diana Shipping

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diana Shipping are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Diana Shipping is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Icon Energy Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Icon Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diana Shipping and Icon Energy

The main advantage of trading using opposite Diana Shipping and Icon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diana Shipping 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 Diana Shipping 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.