Correlation Between GUARDANT HEALTH and HEALTHCARE REAL

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

Diversification Opportunities for GUARDANT HEALTH and HEALTHCARE REAL

0.39

Correlation Coefficient

GUARDANT HEALTH  HEALTHCARE REAL

Weak diversification

The 3 months correlation between GUARDANT and HEALTHCARE is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding GUARDANT HEALTH CL and HEALTHCARE REAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHCARE REAL A 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 HEALTHCARE REAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHCARE REAL A has no effect on the direction of GUARDANT HEALTH i.e., GUARDANT HEALTH and HEALTHCARE REAL go up and down completely randomly.

Pair Corralation between GUARDANT HEALTH and HEALTHCARE REAL

Assuming the 90 days horizon GUARDANT HEALTH CL is expected to generate 3.0 times more return on investment than HEALTHCARE REAL. However, GUARDANT HEALTH is 3.0 times more volatile than HEALTHCARE REAL A. It trades about 0.09 of its potential returns per unit of risk. HEALTHCARE REAL A is currently generating about 0.12 per unit of risk. If you would invest  1,780  in GUARDANT HEALTH CL on October 22, 2024 and sell it today you would earn a total of  1,838  from holding GUARDANT HEALTH CL or generate 103.26% return on investment over 90 days.

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

GUARDANT HEALTH CL  vs.  HEALTHCARE REAL A

GUARDANT HEALTH CL

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 21 (%) 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.

HEALTHCARE REAL A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEALTHCARE REAL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HEALTHCARE REAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GUARDANT HEALTH and HEALTHCARE REAL

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

The idea behind GUARDANT HEALTH CL and HEALTHCARE REAL A 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..