Correlation Between Vanguard 500 and Icon Long/short
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Icon Long/short 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 Vanguard 500 and Icon Long/short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Icon Longshort Fund, you can compare the effects of market volatilities on Vanguard 500 and Icon Long/short 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 Vanguard 500 with a short position of Icon Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Icon Long/short.
Diversification Opportunities for Vanguard 500 and Icon Long/short
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Icon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Icon Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Long/short and Vanguard 500 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 Vanguard 500 Index are associated (or correlated) with Icon Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Long/short has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Icon Long/short go up and down completely randomly.
Pair Corralation between Vanguard 500 and Icon Long/short
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.7 times more return on investment than Icon Long/short. However, Vanguard 500 Index is 1.44 times less risky than Icon Long/short. It trades about 0.13 of its potential returns per unit of risk. Icon Longshort Fund is currently generating about 0.03 per unit of risk. If you would invest 38,886 in Vanguard 500 Index on August 31, 2024 and sell it today you would earn a total of 16,577 from holding Vanguard 500 Index or generate 42.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard 500 Index vs. Icon Longshort Fund
Performance |
| Timeline |
| Vanguard 500 Index |
| Icon Long/short |
Vanguard 500 and Icon Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Icon Long/short
The main advantage of trading using opposite Vanguard 500 and Icon Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Icon Long/short 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 Long/short will offset losses from the drop in Icon Long/short's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Total Bond |
| Icon Long/short vs. Boston Partners Longshort | Icon Long/short vs. Diamond Hill Long Short | Icon Long/short vs. Jpmorgan Research Market | Icon Long/short vs. Calamos Market Neutral |
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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