Correlation Between Ethereum and ICON Project

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

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

Diversification Opportunities for Ethereum and ICON Project

0.78

Correlation Coefficient

Ethereum  ICON Project

Poor diversification

The 3 months correlation between Ethereum and ICON is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and ICON Project in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON Project and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and ICON Project go up and down completely randomly.

Pair Corralation between Ethereum and ICON Project

Assuming the 90 days trading horizon Ethereum is expected to generate 0.55 times more return on investment than ICON Project. However, Ethereum is 1.83 times less risky than ICON Project. It trades about -0.12 of its potential returns per unit of risk. ICON Project is currently generating about -0.09 per unit of risk. If you would invest  357,962  in Ethereum on November 27, 2024 and sell it today you would lose (105,978) from holding Ethereum or give up 29.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Ethereum  vs.  ICON Project

Ethereum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ethereum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's technical indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Ethereum shareholders.

ICON Project

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICON Project has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for ICON Project shareholders.

Pair Trading with Ethereum and ICON Project

The main advantage of trading using opposite Ethereum and ICON Project positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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 Ethereum 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.