Correlation Between IDEXX Laboratories and SPORT LISBOA

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

By analyzing existing cross correlation between IDEXX Laboratories and SPORT LISBOA E, you can compare the effects of market volatilities on IDEXX Laboratories and SPORT LISBOA 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 SPORT LISBOA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEXX Laboratories and SPORT LISBOA.

Diversification Opportunities for IDEXX Laboratories and SPORT LISBOA

0.34

Correlation Coefficient

IDEXX Laboratories  SPORT LISBOA

Weak diversification

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

Pair Corralation between IDEXX Laboratories and SPORT LISBOA

Assuming the 90 days horizon IDEXX Laboratories is expected to generate 1.16 times less return on investment than SPORT LISBOA. But when comparing it to its historical volatility, IDEXX Laboratories is 1.53 times less risky than SPORT LISBOA. It trades about 0.08 of its potential returns per unit of risk. SPORT LISBOA E is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  311.00  in SPORT LISBOA E on September 15, 2024 and sell it today you would earn a total of  7.00  from holding SPORT LISBOA E or generate 2.25% return on investment over 90 days.

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

IDEXX Laboratories  vs.  SPORT LISBOA E

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.

SPORT LISBOA E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORT LISBOA E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPORT LISBOA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IDEXX Laboratories and SPORT LISBOA

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

The idea behind IDEXX Laboratories and SPORT LISBOA E 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.