Correlation Between ICON PLC and IDEXX Laboratories

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

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

Diversification Opportunities for ICON PLC and IDEXX Laboratories

0.74

Correlation Coefficient

ICON PLC  IDEXX Laboratories

Poor diversification

The 3 months correlation between ICON and IDEXX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of ICON PLC i.e., ICON PLC and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between ICON PLC and IDEXX Laboratories

Given the investment horizon of 90 days ICON PLC is expected to under-perform the IDEXX Laboratories. But the stock apears to be less risky and, when comparing its historical volatility, ICON PLC is 1.14 times less risky than IDEXX Laboratories. The stock trades about -0.05 of its potential returns per unit of risk. The IDEXX Laboratories is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  52,971  in IDEXX Laboratories on February 23, 2024 and sell it today you would lose (1,177) from holding IDEXX Laboratories or give up 2.22% of portfolio value over 90 days.

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

ICON PLC  vs.  IDEXX Laboratories

ICON PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICON PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, ICON PLC is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEXX Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ICON PLC and IDEXX Laboratories

The main advantage of trading using opposite ICON PLC and IDEXX Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICON PLC position performs unexpectedly, IDEXX Laboratories 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 IDEXX Laboratories will offset losses from the drop in IDEXX Laboratories' long position.

The idea behind ICON PLC and IDEXX Laboratories 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.