Correlation Between Laboratory and Regional Health

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

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

Diversification Opportunities for Laboratory and Regional Health

0.64

Correlation Coefficient

Laboratory  Regional Health

Poor diversification

The 3 months correlation between Laboratory and Regional is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop 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 Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Laboratory i.e., Laboratory and Regional Health go up and down completely randomly.

Pair Corralation between Laboratory and Regional Health

Allowing for the 90-day total investment horizon Laboratory is expected to generate 25.02 times less return on investment than Regional Health. But when comparing it to its historical volatility, Laboratory of is 21.54 times less risky than Regional Health. It trades about 0.08 of its potential returns per unit of risk. Regional Health Properties is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  174.00  in Regional Health Properties on November 29, 2024 and sell it today you would earn a total of  58.00  from holding Regional Health Properties or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.27%
Values	Daily Returns

Laboratory of  vs.  Regional Health Properties

Laboratory

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 6 (%) 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.

Regional Health Prop

Risk-Adjusted Performance

OK

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laboratory and Regional Health

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

The idea behind Laboratory of and Regional Health Properties 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.