Correlation Between Quest Diagnostics and NeueHealth

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

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

Diversification Opportunities for Quest Diagnostics and NeueHealth

-0.33

Correlation Coefficient

Quest Diagnostics  NeueHealth

Very good diversification

The 3 months correlation between Quest and NeueHealth is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and NeueHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeueHealth and Quest Diagnostics 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 Quest Diagnostics Incorporated are associated (or correlated) with NeueHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeueHealth has no effect on the direction of Quest Diagnostics i.e., Quest Diagnostics and NeueHealth go up and down completely randomly.

Pair Corralation between Quest Diagnostics and NeueHealth

Considering the 90-day investment horizon Quest Diagnostics Incorporated is expected to generate 0.34 times more return on investment than NeueHealth. However, Quest Diagnostics Incorporated is 2.98 times less risky than NeueHealth. It trades about 0.13 of its potential returns per unit of risk. NeueHealth is currently generating about -0.01 per unit of risk. If you would invest  15,023  in Quest Diagnostics Incorporated on December 29, 2024 and sell it today you would earn a total of  1,710  from holding Quest Diagnostics Incorporated or generate 11.38% return on investment over 90 days.

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

Quest Diagnostics Incorporated  vs.  NeueHealth

Quest Diagnostics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Quest Diagnostics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NeueHealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeueHealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NeueHealth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Quest Diagnostics and NeueHealth

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

The idea behind Quest Diagnostics Incorporated and NeueHealth 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.