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

Diversification Opportunities for ICON PLC and SMALL CAPITALIZATION

  Correlation Coefficient

Modest diversification

The 3 months correlation between ICON PLC and SMALL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and SMALL CAPITALIZATION PORTFOLIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMALL CAPITALIZATION and ICON PLC 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 ICON PLC are associated (or correlated) with SMALL CAPITALIZATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMALL CAPITALIZATION has no effect on the direction of ICON PLC i.e., ICON PLC and SMALL CAPITALIZATION go up and down completely randomly.

Pair Corralation between ICON PLC and SMALL CAPITALIZATION

Given the investment horizon of 90 days ICON PLC is expected to generate 1.88 times more return on investment than SMALL CAPITALIZATION. However, ICON PLC is 1.88 times more volatile than SMALL CAPITALIZATION PORTFOLIO. It trades about 0.46 of its potential returns per unit of risk. SMALL CAPITALIZATION PORTFOLIO is currently generating about 0.21 per unit of risk. If you would invest  19,359  in ICON PLC on November 2, 2022 and sell it today you would earn a total of  3,712  from holding ICON PLC or generate 19.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns


 Performance (%) 
ICON PLC Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ICON PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting essential indicators, ICON PLC reported solid returns over the last few months and may actually be approaching a breakup point.

ICON PLC Price Channel

SMALL Performance
0 of 100
Over the last 90 days SMALL CAPITALIZATION PORTFOLIO has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, SMALL CAPITALIZATION is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

SMALL Price Channel


   Predicted Return Density   


The main advantage of trading using opposite ICON PLC and SMALL CAPITALIZATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICON PLC position performs unexpectedly, SMALL CAPITALIZATION 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 SMALL CAPITALIZATION will offset losses from the drop in SMALL CAPITALIZATION's long position.
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The idea behind ICON PLC and SMALL CAPITALIZATION PORTFOLIO 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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