Correlation Between Icon Financial and Small Midcap

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

Diversification Opportunities for Icon Financial and Small Midcap

0.49

Correlation Coefficient

Icon Financial  Small Midcap

Very weak diversification

The 3 months correlation between Icon and Small is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Icon Financial Fund and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend 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 Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Icon Financial i.e., Icon Financial and Small Midcap go up and down completely randomly.

Pair Corralation between Icon Financial and Small Midcap

Assuming the 90 days horizon Icon Financial Fund is expected to under-perform the Small Midcap. In addition to that, Icon Financial is 1.85 times more volatile than Small Midcap Dividend Income. It trades about -0.07 of its total potential returns per unit of risk. Small Midcap Dividend Income is currently generating about -0.03 per unit of volatility. If you would invest  1,919  in Small Midcap Dividend Income on October 8, 2024 and sell it today you would lose (48.00) from holding Small Midcap Dividend Income or give up 2.5% of portfolio value over 90 days.

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

Icon Financial Fund  vs.  Small Midcap Dividend Income

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 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.

Small Midcap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Midcap Dividend Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Small Midcap 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 Financial and Small Midcap

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

The idea behind Icon Financial Fund and Small Midcap Dividend Income 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.