Correlation Between T2 Biosystms and Charles River

Can any of the company-specific risk be diversified away by investing in both T2 Biosystms 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 T2 Biosystms and Charles River into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T2 Biosystms and Charles River Laboratories, you can compare the effects of market volatilities on T2 Biosystms 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 T2 Biosystms with a short position of Charles River. Check out your portfolio center. Please also check ongoing floating volatility patterns of T2 Biosystms and Charles River.

Diversification Opportunities for T2 Biosystms and Charles River

0.65

Correlation Coefficient

T2 Biosystms  Charles River

Poor diversification

The 3 months correlation between TTOO and Charles is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding T2 Biosystms 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 T2 Biosystms 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 T2 Biosystms 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 T2 Biosystms i.e., T2 Biosystms and Charles River go up and down completely randomly.

Pair Corralation between T2 Biosystms and Charles River

Given the investment horizon of 90 days T2 Biosystms is expected to generate 10.86 times more return on investment than Charles River. However, T2 Biosystms is 10.86 times more volatile than Charles River Laboratories. It trades about 0.02 of its potential returns per unit of risk. Charles River Laboratories is currently generating about -0.02 per unit of risk. If you would invest  35.00  in T2 Biosystms on December 18, 2024 and sell it today you would lose (17.00) from holding T2 Biosystms or give up 48.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	74.58%
Values	Daily Returns

T2 Biosystms  vs.  Charles River Laboratories

T2 Biosystms

Risk-Adjusted Performance

Weak

Over the last 90 days T2 Biosystms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, T2 Biosystms displayed solid returns over the last few months and may actually be approaching a breakup point.

Charles River Labora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charles River Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. 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 T2 Biosystms and Charles River

The main advantage of trading using opposite T2 Biosystms and Charles River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T2 Biosystms 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 T2 Biosystms 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.