Correlation Between Equillium and ICON PLC

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

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

Diversification Opportunities for Equillium and ICON PLC

0.82

Correlation Coefficient

Equillium  ICON PLC

Very poor diversification

The 3 months correlation between Equillium and ICON is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Equillium 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 Equillium 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 Equillium i.e., Equillium and ICON PLC go up and down completely randomly.

Pair Corralation between Equillium and ICON PLC

Allowing for the 90-day total investment horizon Equillium is expected to generate 2.89 times more return on investment than ICON PLC. However, Equillium is 2.89 times more volatile than ICON PLC. It trades about 0.02 of its potential returns per unit of risk. ICON PLC is currently generating about 0.04 per unit of risk. If you would invest  253.00  in Equillium on January 26, 2024 and sell it today you would lose (74.00) from holding Equillium or give up 29.25% of portfolio value over 90 days.

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

Equillium  vs.  ICON PLC

Equillium

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

ICON PLC

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Equillium and ICON PLC

The main advantage of trading using opposite Equillium and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equillium 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 Equillium 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.