Correlation Between Cooper Companies and Laboratory

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

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

Diversification Opportunities for Cooper Companies and Laboratory

0.2

Correlation Coefficient

Cooper Companies  Laboratory

Modest diversification

The 3 months correlation between Cooper and Laboratory is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Cooper Companies and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory and Cooper Companies 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 The Cooper Companies are associated (or correlated) with Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Cooper Companies i.e., Cooper Companies and Laboratory go up and down completely randomly.

Pair Corralation between Cooper Companies and Laboratory

Considering the 90-day investment horizon The Cooper Companies is expected to under-perform the Laboratory. But the stock apears to be less risky and, when comparing its historical volatility, The Cooper Companies is 1.2 times less risky than Laboratory. The stock trades about -0.47 of its potential returns per unit of risk. The Laboratory of is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  21,635  in Laboratory of on January 30, 2024 and sell it today you would lose (1,795) from holding Laboratory of or give up 8.3% of portfolio value over 90 days.

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

The Cooper Companies  vs.  Laboratory of

Cooper Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Cooper Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cooper Companies is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Laboratory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratory of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Cooper Companies and Laboratory

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

The idea behind The Cooper Companies and Laboratory of 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.