Correlation Between Small Cap and Icon Financial

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

By analyzing existing cross correlation between Small Cap Equity and Icon Financial Fund, you can compare the effects of market volatilities on Small Cap and Icon Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Icon Financial.

Diversification Opportunities for Small Cap and Icon Financial

0.87

Correlation Coefficient

Small Cap  Icon Financial

Very poor diversification

The 3 months correlation between Small and Icon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial 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 Equity are associated (or correlated) with Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of Small Cap i.e., Small Cap and Icon Financial go up and down completely randomly.

Pair Corralation between Small Cap and Icon Financial

Assuming the 90 days horizon Small Cap Equity is expected to generate 1.08 times more return on investment than Icon Financial. However, Small Cap is 1.08 times more volatile than Icon Financial Fund. It trades about 0.1 of its potential returns per unit of risk. Icon Financial Fund is currently generating about 0.07 per unit of risk. If you would invest  1,673  in Small Cap Equity on May 20, 2025 and sell it today you would earn a total of  103.00  from holding Small Cap Equity or generate 6.16% return on investment over 90 days.

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

Small Cap Equity  vs.  Icon Financial Fund

Small Cap Equity

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Icon Financial

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Financial Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Icon Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Icon Financial

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

The idea behind Small Cap Equity and Icon Financial Fund 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.