Correlation Between Laboratory and ResMed

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

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

Diversification Opportunities for Laboratory and ResMed

0.47

Correlation Coefficient

Laboratory  ResMed

Very weak diversification

The 3 months correlation between Laboratory and ResMed is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Laboratory 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 Laboratory of are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Laboratory i.e., Laboratory and ResMed go up and down completely randomly.

Pair Corralation between Laboratory and ResMed

Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.72 times more return on investment than ResMed. However, Laboratory of is 1.39 times less risky than ResMed. It trades about 0.06 of its potential returns per unit of risk. ResMed Inc is currently generating about -0.01 per unit of risk. If you would invest  22,144  in Laboratory of on September 27, 2024 and sell it today you would earn a total of  963.00  from holding Laboratory of or generate 4.35% return on investment over 90 days.

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

Laboratory of  vs.  ResMed Inc

Laboratory

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

ResMed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ResMed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Laboratory and ResMed

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

The idea behind Laboratory of and ResMed 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.