Correlation Between Quest Diagnostics and Illumina

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

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

Diversification Opportunities for Quest Diagnostics and Illumina

0.12

Correlation Coefficient

Quest Diagnostics  Illumina

Average diversification

The 3 months correlation between Quest and Illumina is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina and Quest Diagnostics 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 Quest Diagnostics Incorporated are associated (or correlated) with Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Quest Diagnostics i.e., Quest Diagnostics and Illumina go up and down completely randomly.

Pair Corralation between Quest Diagnostics and Illumina

Considering the 90-day investment horizon Quest Diagnostics is expected to generate 5.35 times less return on investment than Illumina. But when comparing it to its historical volatility, Quest Diagnostics Incorporated is 1.83 times less risky than Illumina. It trades about 0.04 of its potential returns per unit of risk. Illumina is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  12,625  in Illumina on September 12, 2024 and sell it today you would earn a total of  2,228  from holding Illumina or generate 17.65% return on investment over 90 days.

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

Quest Diagnostics Incorporated  vs.  Illumina

Quest Diagnostics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Quest Diagnostics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Illumina

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Quest Diagnostics and Illumina

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

The idea behind Quest Diagnostics Incorporated and Illumina 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..