Correlation Between IDEXX Laboratories and DexCom

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

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

Diversification Opportunities for IDEXX Laboratories and DexCom

-0.59

Correlation Coefficient

IDEXX Laboratories  DexCom

Excellent diversification

The 3 months correlation between IDEXX and DexCom is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding IDEXX Laboratories and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and IDEXX Laboratories 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 IDEXX Laboratories are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of IDEXX Laboratories i.e., IDEXX Laboratories and DexCom go up and down completely randomly.

Pair Corralation between IDEXX Laboratories and DexCom

Assuming the 90 days horizon IDEXX Laboratories is expected to generate 1.73 times less return on investment than DexCom. But when comparing it to its historical volatility, IDEXX Laboratories is 1.67 times less risky than DexCom. It trades about 0.16 of its potential returns per unit of risk. DexCom Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,982  in DexCom Inc on September 16, 2024 and sell it today you would earn a total of  545.00  from holding DexCom Inc or generate 7.81% return on investment over 90 days.

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

IDEXX Laboratories  vs.  DexCom Inc

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEXX Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DexCom Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DexCom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDEXX Laboratories and DexCom

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

The idea behind IDEXX Laboratories and DexCom 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 Global Correlations module to find global opportunities by holding instruments from different markets.