Correlation Between IDEXX Laboratories and Accuray Incorporated

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

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

Diversification Opportunities for IDEXX Laboratories and Accuray Incorporated

0.8

Correlation Coefficient

IDEXX Laboratories  Accuray Incorporated

Very poor diversification

The 3 months correlation between IDEXX and Accuray is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding IDEXX Laboratories and Accuray Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accuray Incorporated and IDEXX Laboratories 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 IDEXX Laboratories are associated (or correlated) with Accuray Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accuray Incorporated has no effect on the direction of IDEXX Laboratories i.e., IDEXX Laboratories and Accuray Incorporated go up and down completely randomly.

Pair Corralation between IDEXX Laboratories and Accuray Incorporated

Given the investment horizon of 90 days IDEXX Laboratories is expected to generate 0.26 times more return on investment than Accuray Incorporated. However, IDEXX Laboratories is 3.81 times less risky than Accuray Incorporated. It trades about 0.07 of its potential returns per unit of risk. Accuray Incorporated is currently generating about -0.18 per unit of risk. If you would invest  49,779  in IDEXX Laboratories on February 12, 2024 and sell it today you would earn a total of  1,203  from holding IDEXX Laboratories or generate 2.42% return on investment over 90 days.

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

IDEXX Laboratories  vs.  Accuray Incorporated

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Accuray Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Accuray Incorporated 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 fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IDEXX Laboratories and Accuray Incorporated

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

The idea behind IDEXX Laboratories and Accuray Incorporated 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..