Correlation Between Sierra Core and Icon Financial

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

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

Diversification Opportunities for Sierra Core and Icon Financial

0.36

Correlation Coefficient

Sierra Core  Icon Financial

Weak diversification

The 3 months correlation between Sierra and Icon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial and Sierra Core 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 Sierra E Retirement 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 Sierra Core i.e., Sierra Core and Icon Financial go up and down completely randomly.

Pair Corralation between Sierra Core and Icon Financial

Assuming the 90 days horizon Sierra E Retirement is expected to generate 0.27 times more return on investment than Icon Financial. However, Sierra E Retirement is 3.69 times less risky than Icon Financial. It trades about 0.05 of its potential returns per unit of risk. Icon Financial Fund is currently generating about 0.0 per unit of risk. If you would invest  2,136  in Sierra E Retirement on October 25, 2024 and sell it today you would earn a total of  162.00  from holding Sierra E Retirement or generate 7.58% return on investment over 90 days.

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

Sierra E Retirement  vs.  Icon Financial Fund

Sierra E Retirement

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra E Retirement are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sierra Core 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

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.

Pair Trading with Sierra Core and Icon Financial

The main advantage of trading using opposite Sierra Core and Icon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Core 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 Sierra E Retirement 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.