Correlation Between Icon Natural and Tortoise Energy

Can any of the company-specific risk be diversified away by investing in both Icon Natural and Tortoise 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 Icon Natural and Tortoise Energy 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 Tortoise Energy Independence, you can compare the effects of market volatilities on Icon Natural and Tortoise 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 Icon Natural with a short position of Tortoise Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Natural and Tortoise Energy.

Diversification Opportunities for Icon Natural and Tortoise Energy

0.83

Correlation Coefficient

Icon Natural  Tortoise Energy

Very poor diversification

The 3 months correlation between Icon and Tortoise is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and Tortoise Energy Independence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tortoise Energy Inde 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 Tortoise Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tortoise Energy Inde has no effect on the direction of Icon Natural i.e., Icon Natural and Tortoise Energy go up and down completely randomly.

Pair Corralation between Icon Natural and Tortoise Energy

Assuming the 90 days horizon Icon Natural Resources is expected to generate 1.5 times more return on investment than Tortoise Energy. However, Icon Natural is 1.5 times more volatile than Tortoise Energy Independence. It trades about -0.12 of its potential returns per unit of risk. Tortoise Energy Independence is currently generating about -0.22 per unit of risk. If you would invest  1,836  in Icon Natural Resources on November 28, 2024 and sell it today you would lose (139.00) from holding Icon Natural Resources or give up 7.57% 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.  Tortoise Energy Independence

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.

Tortoise Energy Inde

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tortoise Energy Independence 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.

Pair Trading with Icon Natural and Tortoise Energy

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

The idea behind Icon Natural Resources and Tortoise Energy Independence 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.