Correlation Between Valhi and Icon Energy

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

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

Diversification Opportunities for Valhi and Icon Energy

-0.16

Correlation Coefficient

Valhi  Icon Energy

Good diversification

The 3 months correlation between Valhi and Icon is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc 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 Valhi 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 Valhi Inc 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 Valhi i.e., Valhi and Icon Energy go up and down completely randomly.

Pair Corralation between Valhi and Icon Energy

Considering the 90-day investment horizon Valhi Inc is expected to generate 0.48 times more return on investment than Icon Energy. However, Valhi Inc is 2.06 times less risky than Icon Energy. It trades about -0.09 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  3,429  in Valhi Inc on October 25, 2024 and sell it today you would lose (983.00) from holding Valhi Inc or give up 28.67% of portfolio value over 90 days.

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

Valhi Inc  vs.  Icon Energy Corp

Valhi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Icon Energy Corp

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Icon Energy Corp 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 Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Valhi and Icon Energy

The main advantage of trading using opposite Valhi and Icon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi 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 Valhi Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.