Correlation Between Quest Diagnostics and Certara

Can any of the company-specific risk be diversified away by investing in both Quest Diagnostics and Certara 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 Certara 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 Certara, you can compare the effects of market volatilities on Quest Diagnostics and Certara 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 Certara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quest Diagnostics and Certara.

Diversification Opportunities for Quest Diagnostics and Certara

-0.08

Correlation Coefficient

Quest Diagnostics  Certara

Good diversification

The 3 months correlation between Quest and Certara is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and Certara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Certara 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 Certara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Certara has no effect on the direction of Quest Diagnostics i.e., Quest Diagnostics and Certara go up and down completely randomly.

Pair Corralation between Quest Diagnostics and Certara

Considering the 90-day investment horizon Quest Diagnostics is expected to generate 2.14 times less return on investment than Certara. But when comparing it to its historical volatility, Quest Diagnostics Incorporated is 2.48 times less risky than Certara. It trades about 0.01 of its potential returns per unit of risk. Certara is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,863  in Certara on February 3, 2024 and sell it today you would lose (102.00) from holding Certara or give up 5.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Quest Diagnostics Incorporated  vs.  Certara

Quest Diagnostics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 9 (%) 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.

Certara

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Certara are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Certara may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Quest Diagnostics and Certara

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

The idea behind Quest Diagnostics Incorporated and Certara 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.