Correlation Between GUARDANT HEALTH and GAMESTOP

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

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

Diversification Opportunities for GUARDANT HEALTH and GAMESTOP

0.93

Correlation Coefficient

GUARDANT HEALTH  GAMESTOP

Almost no diversification

The 3 months correlation between GUARDANT and GAMESTOP is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding GUARDANT HEALTH CL and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP and GUARDANT HEALTH 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 GUARDANT HEALTH CL are associated (or correlated) with GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of GUARDANT HEALTH i.e., GUARDANT HEALTH and GAMESTOP go up and down completely randomly.

Pair Corralation between GUARDANT HEALTH and GAMESTOP

Assuming the 90 days horizon GUARDANT HEALTH is expected to generate 2.74 times less return on investment than GAMESTOP. But when comparing it to its historical volatility, GUARDANT HEALTH CL is 1.95 times less risky than GAMESTOP. It trades about 0.03 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,705  in GAMESTOP on September 20, 2024 and sell it today you would earn a total of  1,285  from holding GAMESTOP or generate 75.37% return on investment over 90 days.

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

GUARDANT HEALTH CL  vs.  GAMESTOP

GUARDANT HEALTH CL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

GAMESTOP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, GAMESTOP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUARDANT HEALTH and GAMESTOP

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

The idea behind GUARDANT HEALTH CL and GAMESTOP 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.