Correlation Between Value Fund and Icon Information

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

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

Diversification Opportunities for Value Fund and Icon Information

0.76

Correlation Coefficient

Value Fund  Icon Information

Poor diversification

The 3 months correlation between Value and Icon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value 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 Value 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 Value Fund Value 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 Value Fund i.e., Value Fund and Icon Information go up and down completely randomly.

Pair Corralation between Value Fund and Icon Information

Assuming the 90 days horizon Value Fund Value is expected to generate 0.87 times more return on investment than Icon Information. However, Value Fund Value is 1.15 times less risky than Icon Information. It trades about 0.04 of its potential returns per unit of risk. Icon Information Technology is currently generating about 0.02 per unit of risk. If you would invest  1,627  in Value Fund Value on October 11, 2024 and sell it today you would earn a total of  246.00  from holding Value Fund Value or generate 15.12% return on investment over 90 days.

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

Value Fund Value  vs.  Icon Information Technology

Value Fund Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Fund Value 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.

Icon Information Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Information Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Value Fund and Icon Information

The main advantage of trading using opposite Value Fund and Icon Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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 Value Fund Value 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.