Correlation Between Thermo Fisher and Illumina

Can any of the company-specific risk be diversified away by investing in both Thermo Fisher and Illumina 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 Illumina 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 Illumina, you can compare the effects of market volatilities on Thermo Fisher and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermo Fisher and Illumina.

Diversification Opportunities for Thermo Fisher and Illumina

-0.49

Correlation Coefficient

Thermo Fisher  Illumina

Very good diversification

The 3 months correlation between Thermo and Illumina is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and Illumina go up and down completely randomly.

Pair Corralation between Thermo Fisher and Illumina

Considering the 90-day investment horizon Thermo Fisher Scientific is expected to under-perform the Illumina. But the stock apears to be less risky and, when comparing its historical volatility, Thermo Fisher Scientific is 1.88 times less risky than Illumina. The stock trades about -0.21 of its potential returns per unit of risk. The Illumina is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,140  in Illumina on August 30, 2024 and sell it today you would earn a total of  1,296  from holding Illumina or generate 9.86% return on investment over 90 days.

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

Thermo Fisher Scientific  vs.  Illumina

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.

Illumina

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Illumina are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Illumina may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Thermo Fisher and Illumina

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

The idea behind Thermo Fisher Scientific and Illumina 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.