Correlation Between Luxfer Holdings and Icon Energy

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

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

Diversification Opportunities for Luxfer Holdings and Icon Energy

0.26

Correlation Coefficient

Luxfer Holdings  Icon Energy

Modest diversification

The 3 months correlation between Luxfer and Icon is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp and Luxfer Holdings 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 Luxfer Holdings PLC are associated (or correlated) with Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of Luxfer Holdings i.e., Luxfer Holdings and Icon Energy go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Icon Energy

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to generate 0.55 times more return on investment than Icon Energy. However, Luxfer Holdings PLC is 1.82 times less risky than Icon Energy. It trades about 0.13 of its potential returns per unit of risk. Icon Energy Corp is currently generating about 0.03 per unit of risk. If you would invest  1,144  in Luxfer Holdings PLC on September 13, 2024 and sell it today you would earn a total of  258.00  from holding Luxfer Holdings PLC or generate 22.55% return on investment over 90 days.

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

Luxfer Holdings PLC  vs.  Icon Energy Corp

Luxfer Holdings PLC

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Icon Energy Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Icon Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Luxfer Holdings and Icon Energy

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

The idea behind Luxfer Holdings PLC and Icon Energy Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.