Correlation Between One World and ICOA

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

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

Diversification Opportunities for One World and ICOA

-0.04

Correlation Coefficient

One World  ICOA

Good diversification

The 3 months correlation between One and ICOA is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding One World Universe and ICOA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICOA Inc and One World 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 One World Universe are associated (or correlated) with ICOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICOA Inc has no effect on the direction of One World i.e., One World and ICOA go up and down completely randomly.

Pair Corralation between One World and ICOA

Given the investment horizon of 90 days One World is expected to generate 21.35 times less return on investment than ICOA. But when comparing it to its historical volatility, One World Universe is 6.85 times less risky than ICOA. It trades about 0.03 of its potential returns per unit of risk. ICOA Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.09  in ICOA Inc on October 23, 2024 and sell it today you would lose (0.08) from holding ICOA Inc or give up 88.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

One World Universe  vs.  ICOA Inc

One World Universe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days One World Universe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, One World is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ICOA Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICOA Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, ICOA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with One World and ICOA

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

The idea behind One World Universe and ICOA Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.