Correlation Between ICON PLC and EXACT Sciences

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

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

Diversification Opportunities for ICON PLC and EXACT Sciences

0.72

Correlation Coefficient

ICON PLC  EXACT Sciences

Poor diversification

The 3 months correlation between ICON and EXACT is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and EXACT Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXACT Sciences 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 EXACT Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXACT Sciences has no effect on the direction of ICON PLC i.e., ICON PLC and EXACT Sciences go up and down completely randomly.

Pair Corralation between ICON PLC and EXACT Sciences

Given the investment horizon of 90 days ICON PLC is expected to under-perform the EXACT Sciences. But the stock apears to be less risky and, when comparing its historical volatility, ICON PLC is 1.26 times less risky than EXACT Sciences. The stock trades about -0.15 of its potential returns per unit of risk. The EXACT Sciences is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,906  in EXACT Sciences on September 21, 2024 and sell it today you would earn a total of  34.00  from holding EXACT Sciences or generate 0.58% return on investment over 90 days.

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

ICON PLC  vs.  EXACT Sciences

ICON PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICON PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EXACT Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXACT Sciences 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ICON PLC and EXACT Sciences

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

The idea behind ICON PLC and EXACT Sciences 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.