Correlation Between Quest Diagnostics and Mettler Toledo

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

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

Diversification Opportunities for Quest Diagnostics and Mettler Toledo

0.63

Correlation Coefficient

Quest Diagnostics  Mettler Toledo

Poor diversification

The 3 months correlation between Quest and Mettler is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and Mettler Toledo International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mettler Toledo Inter and Quest Diagnostics 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 Diagnostics Incorporated are associated (or correlated) with Mettler Toledo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mettler Toledo Inter has no effect on the direction of Quest Diagnostics i.e., Quest Diagnostics and Mettler Toledo go up and down completely randomly.

Pair Corralation between Quest Diagnostics and Mettler Toledo

Considering the 90-day investment horizon Quest Diagnostics is expected to generate 1.41 times less return on investment than Mettler Toledo. But when comparing it to its historical volatility, Quest Diagnostics Incorporated is 2.06 times less risky than Mettler Toledo. It trades about 0.14 of its potential returns per unit of risk. Mettler Toledo International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  126,798  in Mettler Toledo International on March 1, 2024 and sell it today you would earn a total of  18,657  from holding Mettler Toledo International or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Quest Diagnostics Incorporated  vs.  Mettler Toledo International

Quest Diagnostics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Quest Diagnostics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Mettler Toledo Inter

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mettler Toledo International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Mettler Toledo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quest Diagnostics and Mettler Toledo

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

The idea behind Quest Diagnostics Incorporated and Mettler Toledo International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.