Correlation Between Burning Rock and Guardant Health

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

By analyzing existing cross correlation between Burning Rock Biotech and Guardant Health, you can compare the effects of market volatilities on Burning Rock and Guardant Health 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 Burning Rock with a short position of Guardant Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burning Rock and Guardant Health.

Diversification Opportunities for Burning Rock and Guardant Health

0.87

Correlation Coefficient

Burning Rock  Guardant Health

Very poor diversification

The 3 months correlation between Burning and Guardant is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Burning Rock Biotech and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health and Burning Rock 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 Burning Rock Biotech are associated (or correlated) with Guardant Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardant Health has no effect on the direction of Burning Rock i.e., Burning Rock and Guardant Health go up and down completely randomly.

Pair Corralation between Burning Rock and Guardant Health

Considering the 90-day investment horizon Burning Rock Biotech is expected to under-perform the Guardant Health. In addition to that, Burning Rock is 1.35 times more volatile than Guardant Health. It trades about -0.04 of its total potential returns per unit of risk. Guardant Health is currently generating about 0.02 per unit of volatility. If you would invest  2,784  in Guardant Health on October 3, 2024 and sell it today you would earn a total of  271.00  from holding Guardant Health or generate 9.73% return on investment over 90 days.

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

Burning Rock Biotech  vs.  Guardant Health

Burning Rock Biotech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Guardant Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burning Rock and Guardant Health

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

The idea behind Burning Rock Biotech and Guardant Health 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.