Correlation Between Icon Longshort and Aeye

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

Diversification Opportunities for Icon Longshort and Aeye

0.29

Correlation Coefficient

Icon Longshort  Aeye

Modest diversification

The 3 months correlation between Icon and Aeye is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Icon Longshort Fund and Aeye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeye Inc 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 Aeye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeye Inc has no effect on the direction of Icon Longshort i.e., Icon Longshort and Aeye go up and down completely randomly.

Pair Corralation between Icon Longshort and Aeye

Assuming the 90 days horizon Icon Longshort Fund is expected to generate 0.13 times more return on investment than Aeye. However, Icon Longshort Fund is 7.55 times less risky than Aeye. It trades about -0.27 of its potential returns per unit of risk. Aeye Inc is currently generating about -0.24 per unit of risk. If you would invest  2,679  in Icon Longshort Fund on January 20, 2024 and sell it today you would lose (132.00) from holding Icon Longshort Fund or give up 4.93% of portfolio value over 90 days.

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

Icon Longshort Fund  vs.  Aeye Inc

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.

Aeye Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Icon Longshort and Aeye

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

The idea behind Icon Longshort Fund and Aeye Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.