Correlation Between ICON PLC and Natera

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

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

Diversification Opportunities for ICON PLC and Natera

-0.68

Correlation Coefficient

ICON PLC  Natera

Excellent diversification

The 3 months correlation between ICON and Natera is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding ICON PLC and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc 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 Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of ICON PLC i.e., ICON PLC and Natera go up and down completely randomly.

Pair Corralation between ICON PLC and Natera

Given the investment horizon of 90 days ICON PLC is expected to under-perform the Natera. But the stock apears to be less risky and, when comparing its historical volatility, ICON PLC is 1.01 times less risky than Natera. The stock trades about -0.17 of its potential returns per unit of risk. The Natera Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  12,050  in Natera Inc on September 21, 2024 and sell it today you would earn a total of  4,138  from holding Natera Inc or generate 34.34% return on investment over 90 days.

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

ICON PLC  vs.  Natera Inc

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.

Natera Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICON PLC and Natera

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

The idea behind ICON PLC and Natera Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.