Correlation Between Unconstrained Emerging and Icon Natural

Can any of the company-specific risk be diversified away by investing in both Unconstrained Emerging and Icon Natural 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 Unconstrained Emerging and Icon Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unconstrained Emerging Markets and Icon Natural Resources, you can compare the effects of market volatilities on Unconstrained Emerging and Icon Natural 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 Unconstrained Emerging with a short position of Icon Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unconstrained Emerging and Icon Natural.

Diversification Opportunities for Unconstrained Emerging and Icon Natural

0.93

Correlation Coefficient

Unconstrained Emerging  Icon Natural

Almost no diversification

The 3 months correlation between Unconstrained and Icon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Unconstrained Emerging Markets and Icon Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Natural Resources and Unconstrained Emerging 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 Unconstrained Emerging Markets are associated (or correlated) with Icon Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Natural Resources has no effect on the direction of Unconstrained Emerging i.e., Unconstrained Emerging and Icon Natural go up and down completely randomly.

Pair Corralation between Unconstrained Emerging and Icon Natural

Assuming the 90 days horizon Unconstrained Emerging is expected to generate 2.88 times less return on investment than Icon Natural. But when comparing it to its historical volatility, Unconstrained Emerging Markets is 4.74 times less risky than Icon Natural. It trades about 0.41 of its potential returns per unit of risk. Icon Natural Resources is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,523  in Icon Natural Resources on April 26, 2025 and sell it today you would earn a total of  277.00  from holding Icon Natural Resources or generate 18.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Unconstrained Emerging Markets  vs.  Icon Natural Resources

Unconstrained Emerging

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Unconstrained Emerging Markets are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Unconstrained Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Icon Natural Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Natural Resources are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Natural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unconstrained Emerging and Icon Natural

The main advantage of trading using opposite Unconstrained Emerging and Icon Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unconstrained Emerging position performs unexpectedly, Icon Natural 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 Natural will offset losses from the drop in Icon Natural's long position.

The idea behind Unconstrained Emerging Markets and Icon Natural Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.