Correlation Between Icon Media and Ultrack Systems

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

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

Diversification Opportunities for Icon Media and Ultrack Systems

-0.16

Correlation Coefficient

Icon Media  Ultrack Systems

Good diversification

The 3 months correlation between Icon and Ultrack is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Icon Media Holdings and Ultrack Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrack Systems and Icon Media 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 Icon Media Holdings are associated (or correlated) with Ultrack Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrack Systems has no effect on the direction of Icon Media i.e., Icon Media and Ultrack Systems go up and down completely randomly.

Pair Corralation between Icon Media and Ultrack Systems

Given the investment horizon of 90 days Icon Media is expected to generate 7.67 times less return on investment than Ultrack Systems. But when comparing it to its historical volatility, Icon Media Holdings is 4.67 times less risky than Ultrack Systems. It trades about 0.07 of its potential returns per unit of risk. Ultrack Systems is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.25  in Ultrack Systems on September 14, 2024 and sell it today you would lose (0.23) from holding Ultrack Systems or give up 92.0% of portfolio value over 90 days.

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

Icon Media Holdings  vs.  Ultrack Systems

Icon Media Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Media Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Icon Media displayed solid returns over the last few months and may actually be approaching a breakup point.

Ultrack Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrack Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Ultrack Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icon Media and Ultrack Systems

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

The idea behind Icon Media Holdings and Ultrack Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.