Correlation Between Miton UK and IDEXX Laboratories

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

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

Diversification Opportunities for Miton UK and IDEXX Laboratories

0.77

Correlation Coefficient

Miton UK  IDEXX Laboratories

Poor diversification

The 3 months correlation between Miton and IDEXX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Miton UK MicroCap and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories and Miton UK 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 Miton UK MicroCap are associated (or correlated) with IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Miton UK i.e., Miton UK and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Miton UK and IDEXX Laboratories

Assuming the 90 days trading horizon Miton UK is expected to generate 2.91 times less return on investment than IDEXX Laboratories. But when comparing it to its historical volatility, Miton UK MicroCap is 3.16 times less risky than IDEXX Laboratories. It trades about 0.12 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  42,107  in IDEXX Laboratories on September 17, 2024 and sell it today you would earn a total of  1,310  from holding IDEXX Laboratories or generate 3.11% return on investment over 90 days.

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

Miton UK MicroCap  vs.  IDEXX Laboratories

Miton UK MicroCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Miton UK MicroCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEXX Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Miton UK and IDEXX Laboratories

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

The idea behind Miton UK MicroCap and IDEXX 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .