Correlation Between Midcap Fund and Icon Longshort

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

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

Diversification Opportunities for Midcap Fund and Icon Longshort

0.83

Correlation Coefficient

Midcap Fund  Icon Longshort

Very poor diversification

The 3 months correlation between Midcap and Icon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Icon Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Longshort and Midcap 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 Midcap Fund Institutional are associated (or correlated) with Icon Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Longshort has no effect on the direction of Midcap Fund i.e., Midcap Fund and Icon Longshort go up and down completely randomly.

Pair Corralation between Midcap Fund and Icon Longshort

Assuming the 90 days horizon Midcap Fund Institutional is expected to generate 1.07 times more return on investment than Icon Longshort. However, Midcap Fund is 1.07 times more volatile than Icon Longshort Fund. It trades about 0.08 of its potential returns per unit of risk. Icon Longshort Fund is currently generating about -0.01 per unit of risk. If you would invest  4,062  in Midcap Fund Institutional on February 23, 2024 and sell it today you would earn a total of  142.00  from holding Midcap Fund Institutional or generate 3.5% return on investment over 90 days.

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

Midcap Fund Institutional  vs.  Icon Longshort Fund

Midcap Fund Institutional

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund Institutional are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Midcap Fund and Icon Longshort

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

The idea behind Midcap Fund Institutional and Icon Longshort 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.