Correlation Between Icon Information and Icon Longshort

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

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

Diversification Opportunities for Icon Information and Icon Longshort

0.66

Correlation Coefficient

Icon Information  Icon Longshort

Poor diversification

The 3 months correlation between Icon and Icon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Icon Information Technology and Icon Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Longshort and Icon Information 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 Information Technology are associated (or correlated) with Icon Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Longshort has no effect on the direction of Icon Information i.e., Icon Information and Icon Longshort go up and down completely randomly.

Pair Corralation between Icon Information and Icon Longshort

Assuming the 90 days horizon Icon Information Technology is expected to under-perform the Icon Longshort. But the mutual fund apears to be less risky and, when comparing its historical volatility, Icon Information Technology is 1.36 times less risky than Icon Longshort. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Icon Longshort Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,735  in Icon Longshort Fund on September 16, 2024 and sell it today you would earn a total of  30.00  from holding Icon Longshort Fund or generate 1.1% return on investment over 90 days.

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

Icon Information Technology  vs.  Icon Longshort Fund

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.

Icon Longshort

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Longshort Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Icon Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Icon Information and Icon Longshort

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

The idea behind Icon Information Technology and Icon Longshort 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.