Correlation Between Danaher and ICON PLC

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

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

Diversification Opportunities for Danaher and ICON PLC

0.93

Correlation Coefficient

Danaher  ICON PLC

Almost no diversification

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

Pair Corralation between Danaher and ICON PLC

Considering the 90-day investment horizon Danaher is expected to generate 0.38 times more return on investment than ICON PLC. However, Danaher is 2.66 times less risky than ICON PLC. It trades about -0.1 of its potential returns per unit of risk. ICON PLC is currently generating about -0.15 per unit of risk. If you would invest  26,397  in Danaher on September 3, 2024 and sell it today you would lose (2,268) from holding Danaher or give up 8.59% of portfolio value over 90 days.

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

Danaher  vs.  ICON PLC

Danaher

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

ICON PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICON PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Danaher and ICON PLC

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

The idea behind Danaher and ICON PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.