Correlation Between Quest PharmaTech and Extendicare

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

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

Diversification Opportunities for Quest PharmaTech and Extendicare

0.1

Correlation Coefficient

Quest PharmaTech  Extendicare

Average diversification

The 3 months correlation between Quest and Extendicare is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Quest PharmaTech and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and Quest PharmaTech 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 Quest PharmaTech are associated (or correlated) with Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of Quest PharmaTech i.e., Quest PharmaTech and Extendicare go up and down completely randomly.

Pair Corralation between Quest PharmaTech and Extendicare

If you would invest  726.00  in Extendicare on February 4, 2024 and sell it today you would earn a total of  17.00  from holding Extendicare or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Quest PharmaTech  vs.  Extendicare

Quest PharmaTech

Risk-Adjusted Performance

0 of 100

Modest

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

Extendicare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Extendicare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Extendicare may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Quest PharmaTech and Extendicare

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

The idea behind Quest PharmaTech and Extendicare 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.