Correlation Between Icon Natural and Touchstone Ultra

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

Diversification Opportunities for Icon Natural and Touchstone Ultra

0.54

Correlation Coefficient

Icon Natural  Touchstone Ultra

Very weak diversification

The 3 months correlation between Icon and Touchstone is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and Touchstone Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Ultra Short 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 Touchstone Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Ultra Short has no effect on the direction of Icon Natural i.e., Icon Natural and Touchstone Ultra go up and down completely randomly.

Pair Corralation between Icon Natural and Touchstone Ultra

Assuming the 90 days horizon Icon Natural Resources is expected to generate 11.73 times more return on investment than Touchstone Ultra. However, Icon Natural is 11.73 times more volatile than Touchstone Ultra Short. It trades about 0.03 of its potential returns per unit of risk. Touchstone Ultra Short is currently generating about 0.24 per unit of risk. If you would invest  1,513  in Icon Natural Resources on October 4, 2024 and sell it today you would earn a total of  174.00  from holding Icon Natural Resources or generate 11.5% return on investment over 90 days.

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

Icon Natural Resources  vs.  Touchstone Ultra Short

Icon Natural Resources

Risk-Adjusted Performance

0 of 100

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.

Touchstone Ultra Short

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Ultra Short are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Touchstone Ultra 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 Touchstone Ultra

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

The idea behind Icon Natural Resources and Touchstone Ultra Short 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.