Correlation Between ICF International and Exponent

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

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

Diversification Opportunities for ICF International and Exponent

-0.21

Correlation Coefficient

ICF International  Exponent

Very good diversification

The 3 months correlation between ICF and Exponent is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ICF International and Exponent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exponent and ICF International 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 ICF International are associated (or correlated) with Exponent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exponent has no effect on the direction of ICF International i.e., ICF International and Exponent go up and down completely randomly.

Pair Corralation between ICF International and Exponent

Given the investment horizon of 90 days ICF International is expected to generate 11.59 times less return on investment than Exponent. But when comparing it to its historical volatility, ICF International is 3.7 times less risky than Exponent. It trades about 0.06 of its potential returns per unit of risk. Exponent is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,896  in Exponent on February 4, 2024 and sell it today you would earn a total of  1,346  from holding Exponent or generate 17.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

ICF International  vs.  Exponent

ICF International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICF International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, ICF International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Exponent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exponent are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Exponent displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICF International and Exponent

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

The idea behind ICF International and Exponent 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.