Correlation Between Laboratory and Chemed Corp

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

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

Diversification Opportunities for Laboratory and Chemed Corp

-0.59

Correlation Coefficient

Laboratory  Chemed Corp

Excellent diversification

The 3 months correlation between Laboratory and Chemed is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Chemed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed Corp and Laboratory 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 Laboratory of are associated (or correlated) with Chemed Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemed Corp has no effect on the direction of Laboratory i.e., Laboratory and Chemed Corp go up and down completely randomly.

Pair Corralation between Laboratory and Chemed Corp

Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.63 times more return on investment than Chemed Corp. However, Laboratory of is 1.59 times less risky than Chemed Corp. It trades about 0.13 of its potential returns per unit of risk. Chemed Corp is currently generating about -0.07 per unit of risk. If you would invest  21,620  in Laboratory of on September 13, 2024 and sell it today you would earn a total of  1,586  from holding Laboratory of or generate 7.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Laboratory of  vs.  Chemed Corp

Laboratory

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Chemed Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Laboratory and Chemed Corp

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

The idea behind Laboratory of and Chemed Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.