Correlation Between Utilities Fund and Icon Utilities

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

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

Diversification Opportunities for Utilities Fund and Icon Utilities

0.83

Correlation Coefficient

Utilities Fund  Icon Utilities

Very poor diversification

The 3 months correlation between Utilities and Icon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Class and Icon Utilities And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Utilities And and Utilities Fund 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 Utilities Fund Class are associated (or correlated) with Icon Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Utilities And has no effect on the direction of Utilities Fund i.e., Utilities Fund and Icon Utilities go up and down completely randomly.

Pair Corralation between Utilities Fund and Icon Utilities

Assuming the 90 days horizon Utilities Fund is expected to generate 2.42 times less return on investment than Icon Utilities. In addition to that, Utilities Fund is 1.09 times more volatile than Icon Utilities And. It trades about 0.07 of its total potential returns per unit of risk. Icon Utilities And is currently generating about 0.19 per unit of volatility. If you would invest  938.00  in Icon Utilities And on December 30, 2024 and sell it today you would earn a total of  105.00  from holding Icon Utilities And or generate 11.19% return on investment over 90 days.

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

Utilities Fund Class  vs.  Icon Utilities And

Utilities Fund Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Fund Class are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Utilities Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Icon Utilities And

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Utilities And are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Utilities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Utilities Fund and Icon Utilities

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

The idea behind Utilities Fund Class and Icon Utilities And 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.