Correlation Between Icon Equity and Northern Small
Can any of the company-specific risk be diversified away by investing in both Icon Equity and Northern Small 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 Equity and Northern Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Icon Equity Income and Northern Small Cap, you can compare the effects of market volatilities on Icon Equity and Northern Small 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 Equity with a short position of Northern Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Icon Equity and Northern Small.
Diversification Opportunities for Icon Equity and Northern Small
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ICON and Northern is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Icon Equity Income and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap and Icon Equity 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 Equity Income are associated (or correlated) with Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Icon Equity i.e., Icon Equity and Northern Small go up and down completely randomly.
Pair Corralation between Icon Equity and Northern Small
Assuming the 90 days horizon Icon Equity is expected to generate 1.86 times less return on investment than Northern Small. But when comparing it to its historical volatility, Icon Equity Income is 2.01 times less risky than Northern Small. It trades about 0.08 of its potential returns per unit of risk. Northern Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,442 in Northern Small Cap on September 1, 2024 and sell it today you would earn a total of 805.00 from holding Northern Small Cap or generate 32.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Icon Equity Income vs. Northern Small Cap
Performance |
| Timeline |
| Icon Equity Income |
| Northern Small Cap |
Icon Equity and Northern Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Icon Equity and Northern Small
The main advantage of trading using opposite Icon Equity and Northern Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon Equity position performs unexpectedly, Northern Small 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 Northern Small will offset losses from the drop in Northern Small's long position.| Icon Equity vs. Aquagold International | Icon Equity vs. Thrivent High Yield | Icon Equity vs. Morningstar Unconstrained Allocation | Icon Equity vs. Via Renewables |
| Northern Small vs. Oklahoma College Savings | Northern Small vs. Cref Inflation Linked Bond | Northern Small vs. Aqr Managed Futures | Northern Small vs. Ab Bond Inflation |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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