Correlation Between Laboratory and GE HealthCare
Can any of the company-specific risk be diversified away by investing in both Laboratory and GE HealthCare 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 GE HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laboratory of and GE HealthCare Technologies, you can compare the effects of market volatilities on Laboratory and GE HealthCare 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 GE HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laboratory and GE HealthCare.
Diversification Opportunities for Laboratory and GE HealthCare
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Laboratory and GEHC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and GE HealthCare Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE HealthCare Techno 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 GE HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE HealthCare Techno has no effect on the direction of Laboratory i.e., Laboratory and GE HealthCare go up and down completely randomly.
Pair Corralation between Laboratory and GE HealthCare
Allowing for the 90-day total investment horizon Laboratory of is expected to generate 0.8 times more return on investment than GE HealthCare. However, Laboratory of is 1.25 times less risky than GE HealthCare. It trades about 0.16 of its potential returns per unit of risk. GE HealthCare Technologies is currently generating about 0.04 per unit of risk. If you would invest 22,642 in Laboratory of on November 1, 2024 and sell it today you would earn a total of 2,512 from holding Laboratory of or generate 11.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laboratory of vs. GE HealthCare Technologies
Performance |
| Timeline |
| Laboratory |
| GE HealthCare Techno |
Laboratory and GE HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laboratory and GE HealthCare
The main advantage of trading using opposite Laboratory and GE HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory position performs unexpectedly, GE HealthCare 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 GE HealthCare will offset losses from the drop in GE HealthCare's long position.| Laboratory vs. Quest Diagnostics Incorporated | Laboratory vs. Waters | Laboratory vs. Universal Health Services | Laboratory vs. Humana Inc |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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