Correlation Between Vanguard Mid-cap and Icon Long/short

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap 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 Mid-cap 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 Mid Cap Index and Icon Longshort Fund, you can compare the effects of market volatilities on Vanguard Mid-cap 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 Mid-cap with a short position of Icon Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Icon Long/short.

Diversification Opportunities for Vanguard Mid-cap and Icon Long/short

0.6

Correlation Coefficient

Vanguard Mid-cap  Icon Long/short

Poor diversification

The 3 months correlation between Vanguard and Icon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap 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 Mid-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 Vanguard Mid Cap 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 Mid-cap i.e., Vanguard Mid-cap and Icon Long/short go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Icon Long/short

Assuming the 90 days horizon Vanguard Mid-cap is expected to generate 1.81 times less return on investment than Icon Long/short. But when comparing it to its historical volatility, Vanguard Mid Cap Index is 1.48 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 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,429  in Icon Longshort Fund on May 17, 2025 and sell it today you would earn a total of  247.00  from holding Icon Longshort Fund or generate 10.17% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Icon Longshort Fund

Vanguard Mid Cap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Icon Long/short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Longshort Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Long/short may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Vanguard Mid-cap and Icon Long/short

The main advantage of trading using opposite Vanguard Mid-cap and Icon Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid-cap 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.

The idea behind Vanguard Mid Cap Index and Icon Longshort 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.