Correlation Between Aqr Small and Icon Financial

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

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

Diversification Opportunities for Aqr Small and Icon Financial

0.93

Correlation Coefficient

Aqr Small  Icon Financial

Almost no diversification

The 3 months correlation between Aqr and Icon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial and Aqr Small 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 Aqr Small Cap 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 Aqr Small i.e., Aqr Small and Icon Financial go up and down completely randomly.

Pair Corralation between Aqr Small and Icon Financial

Assuming the 90 days horizon Aqr Small Cap is expected to generate 1.35 times more return on investment than Icon Financial. However, Aqr Small is 1.35 times more volatile than Icon Financial Fund. It trades about 0.17 of its potential returns per unit of risk. Icon Financial Fund is currently generating about 0.14 per unit of risk. If you would invest  2,174  in Aqr Small Cap on August 31, 2024 and sell it today you would earn a total of  336.00  from holding Aqr Small Cap or generate 15.46% return on investment over 90 days.

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

Aqr Small Cap  vs.  Icon Financial Fund

Aqr Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Small showed solid returns over the last few months and may actually be approaching a breakup point.

Icon Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Financial Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Aqr Small and Icon Financial

The main advantage of trading using opposite Aqr Small and Icon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Small 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 Aqr Small Cap 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.