Correlation Between Laboratory and Quest Diagnostics

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

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

Diversification Opportunities for Laboratory and Quest Diagnostics

0.61

Correlation Coefficient

Laboratory  Quest Diagnostics

Poor diversification

The 3 months correlation between Laboratory and Quest is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Quest Diagnostics Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quest Diagnostics 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 Quest Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quest Diagnostics has no effect on the direction of Laboratory i.e., Laboratory and Quest Diagnostics go up and down completely randomly.

Pair Corralation between Laboratory and Quest Diagnostics

Allowing for the 90-day total investment horizon Laboratory is expected to generate 9.3 times less return on investment than Quest Diagnostics. But when comparing it to its historical volatility, Laboratory of is 1.34 times less risky than Quest Diagnostics. It trades about 0.02 of its potential returns per unit of risk. Quest Diagnostics Incorporated is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,023  in Quest Diagnostics Incorporated on December 29, 2024 and sell it today you would earn a total of  1,577  from holding Quest Diagnostics Incorporated or generate 10.5% return on investment over 90 days.

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

Laboratory of  vs.  Quest Diagnostics Incorporated

Laboratory

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 1 (%) 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.

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 9 (%) 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.

Pair Trading with Laboratory and Quest Diagnostics

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

The idea behind Laboratory of and Quest Diagnostics Incorporated 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.