Correlation Between Quest Diagnostics and Modular Medical

Can any of the company-specific risk be diversified away by investing in both Quest Diagnostics and Modular Medical 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 Modular Medical 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 Modular Medical, you can compare the effects of market volatilities on Quest Diagnostics and Modular Medical 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 Modular Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quest Diagnostics and Modular Medical.

Diversification Opportunities for Quest Diagnostics and Modular Medical

-0.34

Correlation Coefficient

Quest Diagnostics  Modular Medical

Very good diversification

The 3 months correlation between Quest and Modular is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and Modular Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modular Medical 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 Modular Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modular Medical has no effect on the direction of Quest Diagnostics i.e., Quest Diagnostics and Modular Medical go up and down completely randomly.

Pair Corralation between Quest Diagnostics and Modular Medical

Considering the 90-day investment horizon Quest Diagnostics Incorporated is expected to generate 0.48 times more return on investment than Modular Medical. However, Quest Diagnostics Incorporated is 2.07 times less risky than Modular Medical. It trades about 0.01 of its potential returns per unit of risk. Modular Medical is currently generating about -0.27 per unit of risk. If you would invest  15,233  in Quest Diagnostics Incorporated on September 24, 2024 and sell it today you would earn a total of  77.00  from holding Quest Diagnostics Incorporated or generate 0.51% return on investment over 90 days.

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

Quest Diagnostics Incorporated  vs.  Modular Medical

Quest Diagnostics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quest Diagnostics Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Quest Diagnostics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Modular Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modular Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Quest Diagnostics and Modular Medical

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

The idea behind Quest Diagnostics Incorporated and Modular Medical 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.