Correlation Between Icon Natural and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Icon Natural and Sterling Capital 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 Sterling Capital 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 Sterling Capital Mid, you can compare the effects of market volatilities on Icon Natural and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Natural and Sterling Capital.

Diversification Opportunities for Icon Natural and Sterling Capital

0.12

Correlation Coefficient

Icon Natural  Sterling Capital

Average diversification

The 3 months correlation between Icon and Sterling is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and Sterling Capital Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Mid 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Mid has no effect on the direction of Icon Natural i.e., Icon Natural and Sterling Capital go up and down completely randomly.

Pair Corralation between Icon Natural and Sterling Capital

Assuming the 90 days horizon Icon Natural Resources is expected to under-perform the Sterling Capital. In addition to that, Icon Natural is 1.53 times more volatile than Sterling Capital Mid. It trades about -0.23 of its total potential returns per unit of risk. Sterling Capital Mid is currently generating about -0.16 per unit of volatility. If you would invest  1,525  in Sterling Capital Mid on December 5, 2024 and sell it today you would lose (47.00) from holding Sterling Capital Mid or give up 3.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Icon Natural Resources  vs.  Sterling Capital Mid

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sterling Capital Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Capital Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Icon Natural and Sterling Capital

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

The idea behind Icon Natural Resources and Sterling Capital Mid 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.