Correlation Between Essential Utilities and Icon Utilities

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

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

Diversification Opportunities for Essential Utilities and Icon Utilities

0.62

Correlation Coefficient

Essential Utilities  Icon Utilities

Poor diversification

The 3 months correlation between Essential and Icon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Essential Utilities and Icon Utilities And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Utilities And and Essential Utilities 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 Essential Utilities 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 And has no effect on the direction of Essential Utilities i.e., Essential Utilities and Icon Utilities go up and down completely randomly.

Pair Corralation between Essential Utilities and Icon Utilities

Given the investment horizon of 90 days Essential Utilities is expected to generate 1.26 times more return on investment than Icon Utilities. However, Essential Utilities is 1.26 times more volatile than Icon Utilities And. It trades about -0.02 of its potential returns per unit of risk. Icon Utilities And is currently generating about -0.17 per unit of risk. If you would invest  3,881  in Essential Utilities on September 17, 2024 and sell it today you would lose (19.00) from holding Essential Utilities or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Essential Utilities  vs.  Icon Utilities And

Essential Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essential Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Essential Utilities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Icon Utilities And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Utilities And 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 Essential Utilities and Icon Utilities

The main advantage of trading using opposite Essential Utilities and Icon Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Utilities 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 Essential Utilities and Icon Utilities And 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.