Correlation Between Icon Natural and The Hartford

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

By analyzing existing cross correlation between Icon Natural Resources and The Hartford Capital, you can compare the effects of market volatilities on Icon Natural and The Hartford 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 Icon Natural with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Natural and The Hartford.

Diversification Opportunities for Icon Natural and The Hartford

0.86

Correlation Coefficient

Icon Natural  The Hartford

Very poor diversification

The 3 months correlation between Icon and The is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and The Hartford Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Capital and Icon Natural 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 Icon Natural Resources are associated (or correlated) with The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Capital has no effect on the direction of Icon Natural i.e., Icon Natural and The Hartford go up and down completely randomly.

Pair Corralation between Icon Natural and The Hartford

Assuming the 90 days horizon Icon Natural Resources is expected to generate 1.48 times more return on investment than The Hartford. However, Icon Natural is 1.48 times more volatile than The Hartford Capital. It trades about -0.02 of its potential returns per unit of risk. The Hartford Capital is currently generating about -0.09 per unit of risk. If you would invest  1,694  in Icon Natural Resources on December 20, 2024 and sell it today you would lose (38.00) from holding Icon Natural Resources or give up 2.24% of portfolio value over 90 days.

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

Icon Natural Resources  vs.  The Hartford Capital

Icon Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icon Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Icon Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Hartford Capital has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Hartford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Icon Natural and The Hartford

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

The idea behind Icon Natural Resources and The Hartford Capital 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.