Correlation Between LabGenomics and RPBio

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

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

Diversification Opportunities for LabGenomics and RPBio

0.41

Correlation Coefficient

LabGenomics  RPBio

Very weak diversification

The 3 months correlation between LabGenomics and RPBio is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LabGenomics Co and RPBio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPBio Inc 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 RPBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPBio Inc has no effect on the direction of LabGenomics i.e., LabGenomics and RPBio go up and down completely randomly.

Pair Corralation between LabGenomics and RPBio

Assuming the 90 days trading horizon LabGenomics is expected to generate 17.14 times less return on investment than RPBio. But when comparing it to its historical volatility, LabGenomics Co is 1.06 times less risky than RPBio. It trades about 0.01 of its potential returns per unit of risk. RPBio Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  487,000  in RPBio Inc on December 4, 2024 and sell it today you would earn a total of  41,000  from holding RPBio Inc or generate 8.42% return on investment over 90 days.

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

LabGenomics Co  vs.  RPBio Inc

LabGenomics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LabGenomics Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LabGenomics sustained solid returns over the last few months and may actually be approaching a breakup point.

RPBio Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RPBio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LabGenomics and RPBio

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

The idea behind LabGenomics Co and RPBio 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.