Correlation Between Vericel Corp and ICON PLC

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

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

Diversification Opportunities for Vericel Corp and ICON PLC

0.49

Correlation Coefficient

Vericel Corp  ICON PLC

Very weak diversification

The 3 months correlation between Vericel and ICON is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Vericel Corp 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 Vericel Corp Ord 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 Vericel Corp i.e., Vericel Corp and ICON PLC go up and down completely randomly.

Pair Corralation between Vericel Corp and ICON PLC

Given the investment horizon of 90 days Vericel Corp Ord is expected to generate 1.51 times more return on investment than ICON PLC. However, Vericel Corp is 1.51 times more volatile than ICON PLC. It trades about -0.05 of its potential returns per unit of risk. ICON PLC is currently generating about -0.2 per unit of risk. If you would invest  4,794  in Vericel Corp Ord on January 25, 2024 and sell it today you would lose (152.00) from holding Vericel Corp Ord or give up 3.17% of portfolio value over 90 days.

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

Vericel Corp Ord  vs.  ICON PLC

Vericel Corp Ord

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vericel Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 Vericel Corp and ICON PLC

The main advantage of trading using opposite Vericel Corp and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vericel Corp 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 Vericel Corp Ord 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.