Correlation Between DermTech and Laboratory

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

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

Diversification Opportunities for DermTech and Laboratory

0.73

Correlation Coefficient

DermTech  Laboratory

Poor diversification

The 3 months correlation between DermTech and Laboratory is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding DermTech and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory and DermTech 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 DermTech 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 DermTech i.e., DermTech and Laboratory go up and down completely randomly.

Pair Corralation between DermTech and Laboratory

Given the investment horizon of 90 days DermTech is expected to under-perform the Laboratory. In addition to that, DermTech is 5.06 times more volatile than Laboratory of. It trades about -0.03 of its total potential returns per unit of risk. Laboratory of is currently generating about 0.01 per unit of volatility. If you would invest  19,947  in Laboratory of on January 29, 2024 and sell it today you would lose (107.00) from holding Laboratory of or give up 0.54% of portfolio value over 90 days.

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

DermTech  vs.  Laboratory of

DermTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DermTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 weak 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 DermTech and Laboratory

The main advantage of trading using opposite DermTech and Laboratory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DermTech 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 DermTech 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.