Correlation Between LabGenomics and DreamCIS

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

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

Diversification Opportunities for LabGenomics and DreamCIS

0.81

Correlation Coefficient

LabGenomics  DreamCIS

Very poor diversification

The 3 months correlation between LabGenomics and DreamCIS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LabGenomics Co and DreamCIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DreamCIS and LabGenomics 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 LabGenomics Co are associated (or correlated) with DreamCIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DreamCIS has no effect on the direction of LabGenomics i.e., LabGenomics and DreamCIS go up and down completely randomly.

Pair Corralation between LabGenomics and DreamCIS

Assuming the 90 days trading horizon LabGenomics Co is expected to generate 1.02 times more return on investment than DreamCIS. However, LabGenomics is 1.02 times more volatile than DreamCIS. It trades about -0.1 of its potential returns per unit of risk. DreamCIS is currently generating about -0.11 per unit of risk. If you would invest  279,000  in LabGenomics Co on September 14, 2024 and sell it today you would lose (23,000) from holding LabGenomics Co or give up 8.24% of portfolio value over 90 days.

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

LabGenomics Co  vs.  DreamCIS

LabGenomics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LabGenomics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DreamCIS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DreamCIS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LabGenomics and DreamCIS

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

The idea behind LabGenomics Co and DreamCIS 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.