Correlation Between VBI Vaccines and ICON PLC

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

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

Diversification Opportunities for VBI Vaccines and ICON PLC

-0.37

Correlation Coefficient

VBI Vaccines  ICON PLC

Very good diversification

The 3 months correlation between VBI and ICON is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding VBI Vaccines and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and VBI Vaccines 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 VBI Vaccines 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 VBI Vaccines i.e., VBI Vaccines and ICON PLC go up and down completely randomly.

Pair Corralation between VBI Vaccines and ICON PLC

Given the investment horizon of 90 days VBI Vaccines is expected to under-perform the ICON PLC. In addition to that, VBI Vaccines is 3.64 times more volatile than ICON PLC. It trades about -0.27 of its total potential returns per unit of risk. ICON PLC is currently generating about -0.09 per unit of volatility. If you would invest  32,096  in ICON PLC on February 6, 2024 and sell it today you would lose (1,194) from holding ICON PLC or give up 3.72% of portfolio value over 90 days.

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

VBI Vaccines  vs.  ICON PLC

VBI Vaccines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VBI Vaccines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, VBI Vaccines is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ICON PLC

Risk-Adjusted Performance

9 of 100

OK

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 weak essential indicators, ICON PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VBI Vaccines and ICON PLC

The main advantage of trading using opposite VBI Vaccines and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VBI Vaccines 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 VBI Vaccines 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.