Correlation Between Icon Longshort and BHP Group

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

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

Diversification Opportunities for Icon Longshort and BHP Group

-0.35

Correlation Coefficient

Icon Longshort  BHP Group

Very good diversification

The 3 months correlation between Icon and BHP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Icon Longshort Fund and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Icon Longshort 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 Longshort Fund are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Icon Longshort i.e., Icon Longshort and BHP Group go up and down completely randomly.

Pair Corralation between Icon Longshort and BHP Group

Assuming the 90 days horizon Icon Longshort Fund is expected to under-perform the BHP Group. But the mutual fund apears to be less risky and, when comparing its historical volatility, Icon Longshort Fund is 1.82 times less risky than BHP Group. The mutual fund trades about -0.14 of its potential returns per unit of risk. The BHP Group Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,655  in BHP Group Limited on January 26, 2024 and sell it today you would earn a total of  269.00  from holding BHP Group Limited or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Icon Longshort Fund  vs.  BHP Group Limited

Icon Longshort

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Longshort Fund are ranked lower than 2 (%) 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.

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, BHP Group is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Icon Longshort and BHP Group

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

The idea behind Icon Longshort Fund and BHP Group Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.