Correlation Between Small Cap and Icon Equity
Can any of the company-specific risk be diversified away by investing in both Small Cap and Icon Equity 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 Small Cap and Icon Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Icon Equity Income, you can compare the effects of market volatilities on Small Cap and Icon Equity 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 Small Cap with a short position of Icon Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Icon Equity.
Diversification Opportunities for Small Cap and Icon Equity
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Icon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Icon Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Equity Income and Small Cap 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 Small Cap Core are associated (or correlated) with Icon Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Equity Income has no effect on the direction of Small Cap i.e., Small Cap and Icon Equity go up and down completely randomly.
Pair Corralation between Small Cap and Icon Equity
Assuming the 90 days horizon Small Cap Core is expected to generate 1.93 times more return on investment than Icon Equity. However, Small Cap is 1.93 times more volatile than Icon Equity Income. It trades about 0.19 of its potential returns per unit of risk. Icon Equity Income is currently generating about 0.15 per unit of risk. If you would invest 1,393 in Small Cap Core on August 28, 2024 and sell it today you would earn a total of 93.00 from holding Small Cap Core or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Small Cap Core vs. Icon Equity Income
Performance |
| Timeline |
| Small Cap Core |
| Icon Equity Income |
Small Cap and Icon Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Icon Equity
The main advantage of trading using opposite Small Cap and Icon Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Icon Equity 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 Equity will offset losses from the drop in Icon Equity's long position.| Small Cap vs. The National Tax Free | Small Cap vs. Ishares Municipal Bond | Small Cap vs. Franklin High Yield | Small Cap vs. Gamco Global Telecommunications |
| Icon Equity vs. Icon Equity Income | Icon Equity vs. American Beacon Balanced | Icon Equity vs. Lord Abbett Value | Icon Equity vs. Victory Floating Rate |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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