Correlation Between Icon Longshort and Chevron Corp

Can any of the company-specific risk be diversified away by investing in both Icon Longshort and Chevron Corp 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 Chevron Corp 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 Chevron Corp, you can compare the effects of market volatilities on Icon Longshort and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Longshort and Chevron Corp.

Diversification Opportunities for Icon Longshort and Chevron Corp

0.49

Correlation Coefficient

Icon Longshort  Chevron Corp

Very weak diversification

The 3 months correlation between Icon and Chevron is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Icon Longshort Fund and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Icon Longshort i.e., Icon Longshort and Chevron Corp go up and down completely randomly.

Pair Corralation between Icon Longshort and Chevron Corp

Assuming the 90 days horizon Icon Longshort Fund is expected to under-perform the Chevron Corp. In addition to that, Icon Longshort is 1.16 times more volatile than Chevron Corp. It trades about -0.27 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.13 per unit of volatility. If you would invest  15,455  in Chevron Corp on January 20, 2024 and sell it today you would earn a total of  302.00  from holding Chevron Corp or generate 1.95% return on investment over 90 days.

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

Icon Longshort Fund  vs.  Chevron Corp

Icon Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Longshort Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Icon Longshort and Chevron Corp

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

The idea behind Icon Longshort Fund and Chevron Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.