Correlation Between ICON PLC and Medpace Holdings

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

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

Diversification Opportunities for ICON PLC and Medpace Holdings

0.62

Correlation Coefficient

ICON PLC  Medpace Holdings

Poor diversification

The 3 months correlation between ICON and Medpace is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and Medpace Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medpace Holdings and ICON PLC 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 PLC are associated (or correlated) with Medpace Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medpace Holdings has no effect on the direction of ICON PLC i.e., ICON PLC and Medpace Holdings go up and down completely randomly.

Pair Corralation between ICON PLC and Medpace Holdings

Given the investment horizon of 90 days ICON PLC is expected to under-perform the Medpace Holdings. In addition to that, ICON PLC is 1.04 times more volatile than Medpace Holdings. It trades about -0.11 of its total potential returns per unit of risk. Medpace Holdings is currently generating about -0.04 per unit of volatility. If you would invest  33,334  in Medpace Holdings on December 28, 2024 and sell it today you would lose (2,098) from holding Medpace Holdings or give up 6.29% of portfolio value over 90 days.

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

ICON PLC  vs.  Medpace Holdings

ICON PLC

Risk-Adjusted Performance

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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Medpace Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medpace Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Medpace Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ICON PLC and Medpace Holdings

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

The idea behind ICON PLC and Medpace Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.