Correlation Between Kodiak Sciences and ICON PLC

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

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

Diversification Opportunities for Kodiak Sciences and ICON PLC

-0.57

Correlation Coefficient

Kodiak Sciences  ICON PLC

Excellent diversification

The 3 months correlation between Kodiak and ICON is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Sciences and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Kodiak Sciences 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 Kodiak Sciences are associated (or correlated) with ICON PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON PLC has no effect on the direction of Kodiak Sciences i.e., Kodiak Sciences and ICON PLC go up and down completely randomly.

Pair Corralation between Kodiak Sciences and ICON PLC

Considering the 90-day investment horizon Kodiak Sciences is expected to generate 3.16 times more return on investment than ICON PLC. However, Kodiak Sciences is 3.16 times more volatile than ICON PLC. It trades about 0.03 of its potential returns per unit of risk. ICON PLC is currently generating about -0.01 per unit of risk. If you would invest  823.00  in Kodiak Sciences on October 23, 2024 and sell it today you would lose (106.00) from holding Kodiak Sciences or give up 12.88% of portfolio value over 90 days.

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

Kodiak Sciences  vs.  ICON PLC

Kodiak Sciences

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

ICON PLC

Risk-Adjusted Performance

0 of 100

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

Pair Trading with Kodiak Sciences and ICON PLC

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

The idea behind Kodiak Sciences and ICON PLC 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..