Correlation Between Charles River and IDEXX Laboratories

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

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

Diversification Opportunities for Charles River and IDEXX Laboratories

-0.38

Correlation Coefficient

Charles River  IDEXX Laboratories

Very good diversification

The 3 months correlation between Charles and IDEXX is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Charles River Laboratories and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories and Charles River 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 Charles River Laboratories 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 Charles River i.e., Charles River and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Charles River and IDEXX Laboratories

Considering the 90-day investment horizon Charles River Laboratories is expected to under-perform the IDEXX Laboratories. But the stock apears to be less risky and, when comparing its historical volatility, Charles River Laboratories is 1.05 times less risky than IDEXX Laboratories. The stock trades about -0.16 of its potential returns per unit of risk. The IDEXX Laboratories is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  41,634  in IDEXX Laboratories on November 19, 2024 and sell it today you would earn a total of  2,819  from holding IDEXX Laboratories or generate 6.77% return on investment over 90 days.

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

Charles River Laboratories  vs.  IDEXX Laboratories

Charles River Labora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charles River Laboratories 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 quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

IDEXX Laboratories

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IDEXX Laboratories are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IDEXX Laboratories may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Charles River and IDEXX Laboratories

The main advantage of trading using opposite Charles River and IDEXX Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles River 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 Charles River Laboratories 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.