Correlation Between Varex Imaging and Chemed Corp

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

By analyzing existing cross correlation between Varex Imaging Corp and Chemed Corp, you can compare the effects of market volatilities on Varex Imaging and Chemed Corp 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 Varex Imaging with a short position of Chemed Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varex Imaging and Chemed Corp.

Diversification Opportunities for Varex Imaging and Chemed Corp

-0.51

Correlation Coefficient

Varex Imaging  Chemed Corp

Excellent diversification

The 3 months correlation between Varex and Chemed is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and Chemed Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemed Corp and Varex Imaging 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 Varex Imaging Corp are associated (or correlated) with Chemed Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemed Corp has no effect on the direction of Varex Imaging i.e., Varex Imaging and Chemed Corp go up and down completely randomly.

Pair Corralation between Varex Imaging and Chemed Corp

Given the investment horizon of 90 days Varex Imaging Corp is expected to generate 1.43 times more return on investment than Chemed Corp. However, Varex Imaging is 1.43 times more volatile than Chemed Corp. It trades about 0.18 of its potential returns per unit of risk. Chemed Corp is currently generating about -0.03 per unit of risk. If you would invest  1,182  in Varex Imaging Corp on September 13, 2024 and sell it today you would earn a total of  368.00  from holding Varex Imaging Corp or generate 31.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Varex Imaging Corp  vs.  Chemed Corp

Varex Imaging Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varex Imaging Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Varex Imaging showed solid returns over the last few months and may actually be approaching a breakup point.

Chemed Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemed Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Chemed Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Varex Imaging and Chemed Corp

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

The idea behind Varex Imaging Corp and Chemed Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.