Correlation Between Icon Natural and American Balanced
Can any of the company-specific risk be diversified away by investing in both Icon Natural and American Balanced 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 Natural and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icon Natural Resources and American Balanced Fund, you can compare the effects of market volatilities on Icon Natural and American Balanced 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 Natural with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Natural and American Balanced.
Diversification Opportunities for Icon Natural and American Balanced
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Icon and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Icon Natural 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 Natural Resources are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Icon Natural i.e., Icon Natural and American Balanced go up and down completely randomly.
Pair Corralation between Icon Natural and American Balanced
Assuming the 90 days horizon Icon Natural Resources is expected to generate 4.29 times more return on investment than American Balanced. However, Icon Natural is 4.29 times more volatile than American Balanced Fund. It trades about 0.09 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.28 per unit of risk. If you would invest 1,781 in Icon Natural Resources on September 2, 2024 and sell it today you would earn a total of 66.00 from holding Icon Natural Resources or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Icon Natural Resources vs. American Balanced Fund
Performance |
| Timeline |
| Icon Natural Resources |
| American Balanced |
Icon Natural and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icon Natural and American Balanced
The main advantage of trading using opposite Icon Natural and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon Natural position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.| Icon Natural vs. Icon Financial Fund | Icon Natural vs. Dreyfus Natural Resources | Icon Natural vs. Icon Natural Resources | Icon Natural vs. Icon Information Technology |
| American Balanced vs. Icon Natural Resources | American Balanced vs. Jennison Natural Resources | American Balanced vs. Goehring Rozencwajg Resources | American Balanced vs. Calvert Global Energy |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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