Correlation Between ICF International and CDT Environmental

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

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

Diversification Opportunities for ICF International and CDT Environmental

0.34

Correlation Coefficient

ICF International  CDT Environmental

Weak diversification

The 3 months correlation between ICF and CDT is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ICF International and CDT Environmental Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDT Environmental and ICF International 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 ICF International are associated (or correlated) with CDT Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDT Environmental has no effect on the direction of ICF International i.e., ICF International and CDT Environmental go up and down completely randomly.

Pair Corralation between ICF International and CDT Environmental

Given the investment horizon of 90 days ICF International is expected to generate 0.36 times more return on investment than CDT Environmental. However, ICF International is 2.78 times less risky than CDT Environmental. It trades about -0.15 of its potential returns per unit of risk. CDT Environmental Technology is currently generating about -0.09 per unit of risk. If you would invest  11,890  in ICF International on December 23, 2024 and sell it today you would lose (3,486) from holding ICF International or give up 29.32% of portfolio value over 90 days.

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

ICF International  vs.  CDT Environmental Technology

ICF International

Risk-Adjusted Performance

Very Weak

Over the last 90 days ICF International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

CDT Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDT Environmental Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ICF International and CDT Environmental

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

The idea behind ICF International and CDT Environmental Technology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.