Correlation Between ICF International and Entergy New

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

By analyzing existing cross correlation between ICF International and Entergy New Orleans, you can compare the effects of market volatilities on ICF International and Entergy New 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 Entergy New. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICF International and Entergy New.

Diversification Opportunities for ICF International and Entergy New

0.79

Correlation Coefficient

ICF International  Entergy New

Poor diversification

The 3 months correlation between ICF and Entergy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ICF International and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans 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 Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of ICF International i.e., ICF International and Entergy New go up and down completely randomly.

Pair Corralation between ICF International and Entergy New

Given the investment horizon of 90 days ICF International is expected to generate 2.13 times more return on investment than Entergy New. However, ICF International is 2.13 times more volatile than Entergy New Orleans. It trades about 0.04 of its potential returns per unit of risk. Entergy New Orleans is currently generating about 0.03 per unit of risk. If you would invest  10,275  in ICF International on September 5, 2024 and sell it today you would earn a total of  3,263  from holding ICF International or generate 31.76% return on investment over 90 days.

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

ICF International  vs.  Entergy New Orleans

ICF International

Risk-Adjusted Performance

0 of 100

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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Entergy New Orleans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Entergy New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ICF International and Entergy New

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

The idea behind ICF International and Entergy New Orleans 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.