Correlation Between Utilities Fund and Icon Utilities

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

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

Diversification Opportunities for Utilities Fund and Icon Utilities

0.9

Correlation Coefficient

Utilities Fund  Icon Utilities

Almost no diversification

The 3 months correlation between Utilities and Icon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Class and Icon Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Utilities and Utilities 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 Utilities Fund Class are associated (or correlated) with Icon Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Utilities has no effect on the direction of Utilities Fund i.e., Utilities Fund and Icon Utilities go up and down completely randomly.

Pair Corralation between Utilities Fund and Icon Utilities

Assuming the 90 days horizon Utilities Fund Class is expected to generate 1.35 times more return on investment than Icon Utilities. However, Utilities Fund is 1.35 times more volatile than Icon Utilities Fund. It trades about -0.02 of its potential returns per unit of risk. Icon Utilities Fund is currently generating about -0.03 per unit of risk. If you would invest  5,238  in Utilities Fund Class on September 17, 2024 and sell it today you would lose (91.00) from holding Utilities Fund Class or give up 1.74% of portfolio value over 90 days.

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

Utilities Fund Class  vs.  Icon Utilities Fund

Utilities Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utilities Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Utilities Fund is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Icon Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Utilities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Icon Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Utilities Fund and Icon Utilities

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

The idea behind Utilities Fund Class and Icon Utilities 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.