Correlation Between Precipio and IDEXX Laboratories

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

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

Diversification Opportunities for Precipio and IDEXX Laboratories

0.53

Correlation Coefficient

Precipio  IDEXX Laboratories

Very weak diversification

The 3 months correlation between Precipio and IDEXX is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Precipio and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories and Precipio 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 Precipio are associated (or correlated) with IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Precipio i.e., Precipio and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Precipio and IDEXX Laboratories

Given the investment horizon of 90 days Precipio is expected to generate 1.29 times more return on investment than IDEXX Laboratories. However, Precipio is 1.29 times more volatile than IDEXX Laboratories. It trades about -0.03 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about -0.1 per unit of risk. If you would invest  641.00  in Precipio on September 12, 2024 and sell it today you would lose (41.00) from holding Precipio or give up 6.4% of portfolio value over 90 days.

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

Precipio  vs.  IDEXX Laboratories

Precipio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precipio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Precipio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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. In spite of latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Precipio and IDEXX Laboratories

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

The idea behind Precipio and IDEXX Laboratories 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.