Correlation Between Mettler Toledo and Charles River

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

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

Diversification Opportunities for Mettler Toledo and Charles River

0.81

Correlation Coefficient

Mettler Toledo  Charles River

Very poor diversification

The 3 months correlation between Mettler and Charles is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Mettler Toledo International and Charles River Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles River Labora and Mettler Toledo 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 Mettler Toledo International are associated (or correlated) with Charles River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles River Labora has no effect on the direction of Mettler Toledo i.e., Mettler Toledo and Charles River go up and down completely randomly.

Pair Corralation between Mettler Toledo and Charles River

Considering the 90-day investment horizon Mettler Toledo is expected to generate 1.38 times less return on investment than Charles River. But when comparing it to its historical volatility, Mettler Toledo International is 1.33 times less risky than Charles River. It trades about 0.04 of its potential returns per unit of risk. Charles River Laboratories is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  21,817  in Charles River Laboratories on February 2, 2024 and sell it today you would earn a total of  1,022  from holding Charles River Laboratories or generate 4.68% return on investment over 90 days.

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

Mettler Toledo International  vs.  Charles River Laboratories

Mettler Toledo Inter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mettler Toledo International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Mettler Toledo is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Charles River Labora

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charles River Laboratories are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Charles River is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mettler Toledo and Charles River

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

The idea behind Mettler Toledo International and Charles River Laboratories 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.