Correlation Between GUARDANT HEALTH and Tri Pointe

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

Diversification Opportunities for GUARDANT HEALTH and Tri Pointe

-0.44

Correlation Coefficient

GUARDANT HEALTH  Tri Pointe

Very good diversification

The 3 months correlation between GUARDANT and Tri is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding GUARDANT HEALTH CL and Tri Pointe Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Pointe Homes 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 Tri Pointe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Pointe Homes has no effect on the direction of GUARDANT HEALTH i.e., GUARDANT HEALTH and Tri Pointe go up and down completely randomly.

Pair Corralation between GUARDANT HEALTH and Tri Pointe

Assuming the 90 days horizon GUARDANT HEALTH CL is expected to generate 1.69 times more return on investment than Tri Pointe. However, GUARDANT HEALTH is 1.69 times more volatile than Tri Pointe Homes. It trades about 0.09 of its potential returns per unit of risk. Tri Pointe Homes is currently generating about -0.21 per unit of risk. If you would invest  3,402  in GUARDANT HEALTH CL on December 4, 2024 and sell it today you would earn a total of  632.00  from holding GUARDANT HEALTH CL or generate 18.58% return on investment over 90 days.

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

GUARDANT HEALTH CL  vs.  Tri Pointe Homes

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 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Tri Pointe Homes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GUARDANT HEALTH and Tri Pointe

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

The idea behind GUARDANT HEALTH CL and Tri Pointe Homes 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.