Correlation Between ICC Holdings and Topbuild Corp

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

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

Diversification Opportunities for ICC Holdings and Topbuild Corp

-0.7

Correlation Coefficient

ICC Holdings  Topbuild Corp

Excellent diversification

The 3 months correlation between ICC and Topbuild is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding ICC Holdings and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and ICC Holdings 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 ICC Holdings are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of ICC Holdings i.e., ICC Holdings and Topbuild Corp go up and down completely randomly.

Pair Corralation between ICC Holdings and Topbuild Corp

Given the investment horizon of 90 days ICC Holdings is expected to generate 0.33 times more return on investment than Topbuild Corp. However, ICC Holdings is 3.02 times less risky than Topbuild Corp. It trades about 0.24 of its potential returns per unit of risk. Topbuild Corp is currently generating about -0.65 per unit of risk. If you would invest  2,310  in ICC Holdings on September 24, 2024 and sell it today you would earn a total of  76.00  from holding ICC Holdings or generate 3.29% return on investment over 90 days.

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

ICC Holdings  vs.  Topbuild Corp

ICC Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, ICC Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Topbuild Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ICC Holdings and Topbuild Corp

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

The idea behind ICC Holdings and Topbuild Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.