Correlation Between Icon Utilities and Conestoga Smid

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

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

Diversification Opportunities for Icon Utilities and Conestoga Smid

0.69

Correlation Coefficient

Icon Utilities  Conestoga Smid

Poor diversification

The 3 months correlation between Icon and Conestoga is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Icon Utilities Fund and Conestoga Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conestoga Smid Cap and Icon Utilities 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 Utilities Fund are associated (or correlated) with Conestoga Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conestoga Smid Cap has no effect on the direction of Icon Utilities i.e., Icon Utilities and Conestoga Smid go up and down completely randomly.

Pair Corralation between Icon Utilities and Conestoga Smid

Assuming the 90 days horizon Icon Utilities is expected to generate 3.59 times less return on investment than Conestoga Smid. But when comparing it to its historical volatility, Icon Utilities Fund is 1.35 times less risky than Conestoga Smid. It trades about 0.08 of its potential returns per unit of risk. Conestoga Smid Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,496  in Conestoga Smid Cap on September 5, 2024 and sell it today you would earn a total of  358.00  from holding Conestoga Smid Cap or generate 14.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Icon Utilities Fund  vs.  Conestoga Smid Cap

Icon Utilities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Utilities Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Icon Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Conestoga Smid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Conestoga Smid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Conestoga Smid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icon Utilities and Conestoga Smid

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

The idea behind Icon Utilities Fund and Conestoga Smid Cap 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.