Correlation Between ICON PLC and Verve Therapeutics

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

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

Diversification Opportunities for ICON PLC and Verve Therapeutics

-0.12

Correlation Coefficient

ICON PLC  Verve Therapeutics

Good diversification

The 3 months correlation between ICON and Verve is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and Verve Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verve Therapeutics 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 Verve Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verve Therapeutics has no effect on the direction of ICON PLC i.e., ICON PLC and Verve Therapeutics go up and down completely randomly.

Pair Corralation between ICON PLC and Verve Therapeutics

Given the investment horizon of 90 days ICON PLC is expected to under-perform the Verve Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, ICON PLC is 2.63 times less risky than Verve Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Verve Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  554.00  in Verve Therapeutics on December 28, 2024 and sell it today you would lose (14.00) from holding Verve Therapeutics or give up 2.53% of portfolio value over 90 days.

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

ICON PLC  vs.  Verve Therapeutics

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.

Verve Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verve Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verve Therapeutics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ICON PLC and Verve Therapeutics

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

The idea behind ICON PLC and Verve Therapeutics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.