Correlation Between GUARDANT HEALTH and JAPAN TOBACCO

Can any of the company-specific risk be diversified away by investing in both GUARDANT HEALTH and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on GUARDANT HEALTH and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUARDANT HEALTH and JAPAN TOBACCO.

Diversification Opportunities for GUARDANT HEALTH and JAPAN TOBACCO

-0.01

Correlation Coefficient

GUARDANT HEALTH  JAPAN TOBACCO

Good diversification

The 3 months correlation between GUARDANT and JAPAN is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding GUARDANT HEALTH CL and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of GUARDANT HEALTH i.e., GUARDANT HEALTH and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between GUARDANT HEALTH and JAPAN TOBACCO

Assuming the 90 days horizon GUARDANT HEALTH CL is expected to generate 3.98 times more return on investment than JAPAN TOBACCO. However, GUARDANT HEALTH is 3.98 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.14 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.1 per unit of risk. If you would invest  2,895  in GUARDANT HEALTH CL on December 30, 2024 and sell it today you would earn a total of  1,220  from holding GUARDANT HEALTH CL or generate 42.14% return on investment over 90 days.

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

GUARDANT HEALTH CL  vs.  JAPAN TOBACCO UNSPADR12

GUARDANT HEALTH CL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 10 (%) 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.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JAPAN TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GUARDANT HEALTH and JAPAN TOBACCO

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

The idea behind GUARDANT HEALTH CL and JAPAN TOBACCO UNSPADR12 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.