Correlation Between Laboratory and Charles River

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

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

Diversification Opportunities for Laboratory and Charles River

0.35

Correlation Coefficient

Laboratory  Charles River

Weak diversification

The 3 months correlation between Laboratory and Charles is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Charles River Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles River Labora 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 Charles River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles River Labora has no effect on the direction of Laboratory i.e., Laboratory and Charles River go up and down completely randomly.

Pair Corralation between Laboratory and Charles River

Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.51 times more return on investment than Charles River. However, Laboratory of is 1.94 times less risky than Charles River. It trades about 0.07 of its potential returns per unit of risk. Charles River Laboratories is currently generating about 0.04 per unit of risk. If you would invest  22,902  in Laboratory of on August 31, 2024 and sell it today you would earn a total of  1,313  from holding Laboratory of or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Laboratory of  vs.  Charles River Laboratories

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Charles River Labora

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charles River Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Charles River is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Laboratory and Charles River

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

The idea behind Laboratory of and Charles River 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 Global Correlations module to find global opportunities by holding instruments from different markets.