Correlation Between Technology Ultrasector and Icon Information

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

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

Diversification Opportunities for Technology Ultrasector and Icon Information

0.82

Correlation Coefficient

Technology Ultrasector  Icon Information

Very poor diversification

The 3 months correlation between TECHNOLOGY and Icon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Icon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Information Tec and Technology Ultrasector 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 Technology Ultrasector Profund are associated (or correlated) with Icon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Information Tec has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and Icon Information go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Icon Information

Assuming the 90 days horizon Technology Ultrasector Profund is expected to generate 1.94 times more return on investment than Icon Information. However, Technology Ultrasector is 1.94 times more volatile than Icon Information Technology. It trades about 0.08 of its potential returns per unit of risk. Icon Information Technology is currently generating about 0.04 per unit of risk. If you would invest  1,790  in Technology Ultrasector Profund on August 31, 2024 and sell it today you would earn a total of  1,321  from holding Technology Ultrasector Profund or generate 73.8% return on investment over 90 days.

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

Technology Ultrasector Profund  vs.  Icon Information Technology

Technology Ultrasector

Risk-Adjusted Performance

9 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Ultrasector Profund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Technology Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Icon Information Tec

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Information Technology are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Icon Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Technology Ultrasector and Icon Information

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

The idea behind Technology Ultrasector Profund and Icon Information Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.