Correlation Between Sp 500 and Icon Financial

Can any of the company-specific risk be diversified away by investing in both Sp 500 and Icon Financial 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 Sp 500 and Icon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp 500 Fund and Icon Financial Fund, you can compare the effects of market volatilities on Sp 500 and Icon Financial 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 Sp 500 with a short position of Icon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Icon Financial.

Diversification Opportunities for Sp 500 and Icon Financial

0.95

Correlation Coefficient

Sp 500  Icon Financial

Almost no diversification

The 3 months correlation between RYSYX and Icon is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Fund and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial and Sp 500 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 Sp 500 Fund are associated (or correlated) with Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of Sp 500 i.e., Sp 500 and Icon Financial go up and down completely randomly.

Pair Corralation between Sp 500 and Icon Financial

Assuming the 90 days horizon Sp 500 Fund is expected to under-perform the Icon Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sp 500 Fund is 1.01 times less risky than Icon Financial. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Icon Financial Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  952.00  in Icon Financial Fund on December 28, 2024 and sell it today you would lose (43.00) from holding Icon Financial Fund or give up 4.52% of portfolio value over 90 days.

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

Sp 500 Fund  vs.  Icon Financial Fund

Sp 500 Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp 500 Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sp 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Icon Financial

Risk-Adjusted Performance

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.

Pair Trading with Sp 500 and Icon Financial

The main advantage of trading using opposite Sp 500 and Icon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Icon Financial 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 Financial will offset losses from the drop in Icon Financial's long position.

The idea behind Sp 500 Fund and Icon Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.