Correlation Between Laboratory and ICON PLC

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Can any of the company-specific risk be diversified away by investing in both Laboratory 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 Laboratory and ICON PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laboratory of and ICON PLC, you can compare the effects of market volatilities on Laboratory 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 Laboratory with a short position of ICON PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laboratory and ICON PLC.

Diversification Opportunities for Laboratory and ICON PLC

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Laboratory and ICON is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Laboratory 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 Laboratory of 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 Laboratory i.e., Laboratory and ICON PLC go up and down completely randomly.

Pair Corralation between Laboratory and ICON PLC

Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.38 times more return on investment than ICON PLC. However, Laboratory of is 2.6 times less risky than ICON PLC. It trades about 0.07 of its potential returns per unit of risk. ICON PLC is currently generating about -0.16 per unit of risk. If you would invest  22,902  in Laboratory of on September 2, 2024 and sell it today you would earn a total of  1,214  from holding Laboratory of or generate 5.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Laboratory of  vs.  ICON PLC

 Performance 
       Timeline  
Laboratory 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
ICON PLC 

Risk-Adjusted Performance

0 of 100

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

Laboratory and ICON PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Laboratory and ICON PLC

The main advantage of trading using opposite Laboratory and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory 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 Laboratory of 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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