Correlation Between Caredx and ICON PLC

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

Diversification Opportunities for Caredx and ICON PLC

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Caredx and ICON is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caredx Inc and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Caredx 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 Caredx Inc 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 Caredx i.e., Caredx and ICON PLC go up and down completely randomly.

Pair Corralation between Caredx and ICON PLC

Given the investment horizon of 90 days Caredx Inc is expected to generate 2.2 times more return on investment than ICON PLC. However, Caredx is 2.2 times more volatile than ICON PLC. It trades about 0.1 of its potential returns per unit of risk. ICON PLC is currently generating about -0.08 per unit of risk. If you would invest  1,064  in Caredx Inc on August 27, 2024 and sell it today you would earn a total of  1,249  from holding Caredx Inc or generate 117.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Caredx Inc  vs.  ICON PLC

 Performance 
       Timeline  
Caredx Inc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Caredx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
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 weak performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Caredx and ICON PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caredx and ICON PLC

The main advantage of trading using opposite Caredx and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caredx 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.
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The idea behind Caredx Inc 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.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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