Correlation Between Rational Defensive and Icon Financial
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Icon Financial 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 Rational Defensive and Icon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Icon Financial Fund, you can compare the effects of market volatilities on Rational Defensive and Icon Financial 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 Rational Defensive with a short position of Icon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Icon Financial.
Diversification Opportunities for Rational Defensive and Icon Financial
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rational and Icon is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of Rational Defensive i.e., Rational Defensive and Icon Financial go up and down completely randomly.
Pair Corralation between Rational Defensive and Icon Financial
Assuming the 90 days horizon Rational Defensive Growth is expected to generate 0.85 times more return on investment than Icon Financial. However, Rational Defensive Growth is 1.17 times less risky than Icon Financial. It trades about 0.11 of its potential returns per unit of risk. Icon Financial Fund is currently generating about -0.01 per unit of risk. If you would invest 2,780 in Rational Defensive Growth on September 12, 2024 and sell it today you would earn a total of 1,347 from holding Rational Defensive Growth or generate 48.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Icon Financial Fund
Performance |
| Timeline |
| Rational Defensive Growth |
| Icon Financial |
Rational Defensive and Icon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Icon Financial
The main advantage of trading using opposite Rational Defensive and Icon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Icon Financial 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 Financial will offset losses from the drop in Icon Financial's long position.The idea behind Rational Defensive Growth and Icon Financial 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.
| Icon Financial vs. T Rowe Price | Icon Financial vs. Rational Defensive Growth | Icon Financial vs. Franklin Growth Opportunities | Icon Financial vs. Smallcap Growth Fund |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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