Correlation Between Quest Diagnostics and Waters

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

Diversification Opportunities for Quest Diagnostics and Waters

-0.15

Correlation Coefficient

Quest Diagnostics  Waters

Good diversification

The 3 months correlation between Quest and Waters is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Quest Diagnostics i.e., Quest Diagnostics and Waters go up and down completely randomly.

Pair Corralation between Quest Diagnostics and Waters

Considering the 90-day investment horizon Quest Diagnostics Incorporated is expected to generate 0.79 times more return on investment than Waters. However, Quest Diagnostics Incorporated is 1.26 times less risky than Waters. It trades about 0.11 of its potential returns per unit of risk. Waters is currently generating about -0.01 per unit of risk. If you would invest  15,189  in Quest Diagnostics Incorporated on December 27, 2024 and sell it today you would earn a total of  1,473  from holding Quest Diagnostics Incorporated or generate 9.7% 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.  Waters

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 8 (%) 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.

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Quest Diagnostics and Waters

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

The idea behind Quest Diagnostics Incorporated and Waters 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.