Correlation Between IDEXX Laboratories and Waters

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

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

Diversification Opportunities for IDEXX Laboratories and Waters

0.35

Correlation Coefficient

IDEXX Laboratories  Waters

Weak diversification

The 3 months correlation between IDEXX and Waters is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding IDEXX Laboratories and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and IDEXX Laboratories 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 IDEXX Laboratories 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 IDEXX Laboratories i.e., IDEXX Laboratories and Waters go up and down completely randomly.

Pair Corralation between IDEXX Laboratories and Waters

Given the investment horizon of 90 days IDEXX Laboratories is expected to generate 1.14 times more return on investment than Waters. However, IDEXX Laboratories is 1.14 times more volatile than Waters. It trades about 0.03 of its potential returns per unit of risk. Waters is currently generating about 0.0 per unit of risk. If you would invest  41,275  in IDEXX Laboratories on December 28, 2024 and sell it today you would earn a total of  979.00  from holding IDEXX Laboratories or generate 2.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

IDEXX Laboratories  vs.  Waters

IDEXX Laboratories

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IDEXX Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IDEXX Laboratories is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 IDEXX Laboratories and Waters

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

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 CEOs Directory module to screen CEOs from public companies around the world.