Correlation Between Viking Therapeutics and ICON PLC

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

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

Diversification Opportunities for Viking Therapeutics and ICON PLC

0.77

Correlation Coefficient

Viking Therapeutics  ICON PLC

Poor diversification

The 3 months correlation between Viking and ICON is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Viking Therapeutics and ICON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON PLC and Viking Therapeutics 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 Viking Therapeutics 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 Viking Therapeutics i.e., Viking Therapeutics and ICON PLC go up and down completely randomly.

Pair Corralation between Viking Therapeutics and ICON PLC

Given the investment horizon of 90 days Viking Therapeutics is expected to generate 1.65 times more return on investment than ICON PLC. However, Viking Therapeutics is 1.65 times more volatile than ICON PLC. It trades about 0.04 of its potential returns per unit of risk. ICON PLC is currently generating about -0.08 per unit of risk. If you would invest  7,588  in Viking Therapeutics on February 7, 2024 and sell it today you would earn a total of  109.00  from holding Viking Therapeutics or generate 1.44% return on investment over 90 days.

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

Viking Therapeutics  vs.  ICON PLC

Viking Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Viking Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Viking Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

ICON PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICON PLC are ranked lower than 8 (%) 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 Viking Therapeutics and ICON PLC

The main advantage of trading using opposite Viking Therapeutics and ICON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viking Therapeutics 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 Viking Therapeutics 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.