Correlation Between Icon Offshore and Nestle Bhd

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

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

Diversification Opportunities for Icon Offshore and Nestle Bhd

0.04

Correlation Coefficient

Icon Offshore  Nestle Bhd

Significant diversification

The 3 months correlation between Icon and Nestle is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Icon Offshore Bhd and Nestle Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle Bhd and Icon Offshore 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 Icon Offshore Bhd are associated (or correlated) with Nestle Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle Bhd has no effect on the direction of Icon Offshore i.e., Icon Offshore and Nestle Bhd go up and down completely randomly.

Pair Corralation between Icon Offshore and Nestle Bhd

Assuming the 90 days trading horizon Icon Offshore Bhd is expected to generate 1.04 times more return on investment than Nestle Bhd. However, Icon Offshore is 1.04 times more volatile than Nestle Bhd. It trades about -0.05 of its potential returns per unit of risk. Nestle Bhd is currently generating about -0.18 per unit of risk. If you would invest  106.00  in Icon Offshore Bhd on December 2, 2024 and sell it today you would lose (4.00) from holding Icon Offshore Bhd or give up 3.77% of portfolio value over 90 days.

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

Icon Offshore Bhd  vs.  Nestle Bhd

Icon Offshore Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icon Offshore Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Icon Offshore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nestle Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nestle Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Icon Offshore and Nestle Bhd

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

The idea behind Icon Offshore Bhd and Nestle Bhd 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.