Correlation Between Laboratory and ICON PLC
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
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Laboratory and ICON is -0.65. 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 0.6 times more return on investment than ICON PLC. However, Laboratory of is 1.67 times less risky than ICON PLC. It trades about 0.05 of its potential returns per unit of risk. ICON PLC is currently generating about -0.08 per unit of risk. If you would invest 21,437 in Laboratory of on August 27, 2024 and sell it today you would earn a total of 2,530 from holding Laboratory of or generate 11.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laboratory of vs. ICON PLC
Performance |
| Timeline |
| Laboratory |
| ICON PLC |
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.| Laboratory vs. Quest Diagnostics Incorporated | Laboratory vs. Waters | Laboratory vs. Universal Health Services | Laboratory vs. Humana Inc |
| ICON PLC vs. Mettler Toledo International | ICON PLC vs. Charles River Laboratories | ICON PLC vs. Laboratory of | ICON PLC vs. IQVIA Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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