Correlation Between Neste Oyj and ICON PLC

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

Diversification Opportunities for Neste Oyj and ICON PLC

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Neste and ICON PLC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Neste Oyj 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 Neste Oyj 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 Neste Oyj i.e., Neste Oyj and ICON PLC go up and down completely randomly.

Pair Corralation between Neste Oyj and ICON PLC

Assuming the 90 days horizon Neste Oyj is expected to generate 3.08 times less return on investment than ICON PLC. In addition to that, Neste Oyj is 1.16 times more volatile than ICON PLC. It trades about 0.0 of its total potential returns per unit of risk. ICON PLC is currently generating about 0.01 per unit of volatility. If you would invest  20,330  in ICON PLC on December 23, 2022 and sell it today you would earn a total of  533.00  from holding ICON PLC or generate 2.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Neste Oyj  vs.  ICON PLC

 Performance (%) 
       Timeline  
Neste Oyj 

Neste Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Neste Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Neste Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
ICON PLC 

ICON PLC Performance

5 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in ICON PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent essential indicators, ICON PLC may actually be approaching a critical reversion point that can send shares even higher in April 2023.

Neste Oyj and ICON PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Neste Oyj and ICON PLC

The main advantage of trading using opposite Neste Oyj and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oyj 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 Neste Oyj 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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