Correlation Between American Funds and Icon Equity
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Icon Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Growth and Icon Equity Income, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Icon Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Icon Equity.
Diversification Opportunities for American Funds and Icon Equity
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Icon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth 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 American Funds 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 American Funds Growth 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 American Funds i.e., American Funds and Icon Equity go up and down completely randomly.
Pair Corralation between American Funds and Icon Equity
Assuming the 90 days horizon American Funds Growth is expected to generate 1.38 times more return on investment than Icon Equity. However, American Funds is 1.38 times more volatile than Icon Equity Income. It trades about 0.07 of its potential returns per unit of risk. Icon Equity Income is currently generating about 0.04 per unit of risk. If you would invest 1,864 in American Funds Growth on March 29, 2025 and sell it today you would earn a total of 780.00 from holding American Funds Growth or generate 41.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Growth vs. Icon Equity Income
Performance |
| Timeline |
| American Funds Growth |
| Icon Equity Income |
American Funds and Icon Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Icon Equity
The main advantage of trading using opposite American Funds and Icon Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Artisan High Income | American Funds vs. Goldman Sachs High | American Funds vs. Pioneer High Yield | American Funds vs. Prudential High Yield |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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