Correlation Between Icon Equity and Icon Long/short

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

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

Diversification Opportunities for Icon Equity and Icon Long/short

0.69

Correlation Coefficient

Icon Equity  Icon Long/short

Poor diversification

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

Pair Corralation between Icon Equity and Icon Long/short

Assuming the 90 days horizon Icon Equity Income is expected to generate 0.71 times more return on investment than Icon Long/short. However, Icon Equity Income is 1.41 times less risky than Icon Long/short. It trades about 0.2 of its potential returns per unit of risk. Icon Longshort Fund is currently generating about -0.14 per unit of risk. If you would invest  1,636  in Icon Equity Income on December 5, 2024 and sell it today you would earn a total of  44.00  from holding Icon Equity Income or generate 2.69% return on investment over 90 days.

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

Icon Equity Income  vs.  Icon Longshort Fund

Icon Equity Income

Risk-Adjusted Performance

Very Weak

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

Icon Long/short

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icon Longshort Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Icon Long/short 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 Equity and Icon Long/short

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

The idea behind Icon Equity Income and Icon Longshort Fund 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.