Correlation Between Thermo Fisher and Charles River

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

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

Diversification Opportunities for Thermo Fisher and Charles River

0.08

Correlation Coefficient

Thermo Fisher  Charles River

Significant diversification

The 3 months correlation between Thermo and Charles is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Charles River Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles River Labora and Thermo Fisher 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 Thermo Fisher Scientific are associated (or correlated) with Charles River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles River Labora has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and Charles River go up and down completely randomly.

Pair Corralation between Thermo Fisher and Charles River

Considering the 90-day investment horizon Thermo Fisher Scientific is expected to under-perform the Charles River. But the stock apears to be less risky and, when comparing its historical volatility, Thermo Fisher Scientific is 2.08 times less risky than Charles River. The stock trades about -0.17 of its potential returns per unit of risk. The Charles River Laboratories is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  19,204  in Charles River Laboratories on September 1, 2024 and sell it today you would earn a total of  702.00  from holding Charles River Laboratories or generate 3.66% return on investment over 90 days.

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

Thermo Fisher Scientific  vs.  Charles River Laboratories

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Charles River Labora

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charles River Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Charles River is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Thermo Fisher and Charles River

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

The idea behind Thermo Fisher Scientific and Charles River 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.