Correlation Between Icon Financial and Small Cap

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

By analyzing existing cross correlation between Icon Financial Fund and Small Cap Value, you can compare the effects of market volatilities on Icon Financial and Small Cap 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 Financial with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Financial and Small Cap.

Diversification Opportunities for Icon Financial and Small Cap

0.01

Correlation Coefficient

Icon Financial  Small Cap

Significant diversification

The 3 months correlation between Icon and Small is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Icon Financial Fund and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Icon Financial 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 Financial Fund are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Icon Financial i.e., Icon Financial and Small Cap go up and down completely randomly.

Pair Corralation between Icon Financial and Small Cap

Assuming the 90 days horizon Icon Financial Fund is expected to under-perform the Small Cap. In addition to that, Icon Financial is 1.79 times more volatile than Small Cap Value. It trades about -0.08 of its total potential returns per unit of risk. Small Cap Value is currently generating about 0.1 per unit of volatility. If you would invest  1,133  in Small Cap Value on September 13, 2024 and sell it today you would earn a total of  64.00  from holding Small Cap Value or generate 5.65% return on investment over 90 days.

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

Icon Financial Fund  vs.  Small Cap Value

Icon Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Small Cap Value

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Icon Financial and Small Cap

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

The idea behind Icon Financial Fund and Small Cap Value 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.