Correlation Between Laboratory and Semler Scientific

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

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

Diversification Opportunities for Laboratory and Semler Scientific

0.73

Correlation Coefficient

Laboratory  Semler Scientific

Poor diversification

The 3 months correlation between Laboratory and Semler is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Semler Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semler Scientific 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 Semler Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semler Scientific has no effect on the direction of Laboratory i.e., Laboratory and Semler Scientific go up and down completely randomly.

Pair Corralation between Laboratory and Semler Scientific

Allowing for the 90-day total investment horizon Laboratory of is expected to under-perform the Semler Scientific. But the stock apears to be less risky and, when comparing its historical volatility, Laboratory of is 7.84 times less risky than Semler Scientific. The stock trades about -0.21 of its potential returns per unit of risk. The Semler Scientific is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,643  in Semler Scientific on September 22, 2024 and sell it today you would lose (465.00) from holding Semler Scientific or give up 7.0% of portfolio value over 90 days.

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

Laboratory of  vs.  Semler Scientific

Laboratory

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 2 (%) 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.

Semler Scientific

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semler Scientific are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Semler Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laboratory and Semler Scientific

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

The idea behind Laboratory of and Semler Scientific 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.