Correlation Between Caredx and BioLife Solutions

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

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

Diversification Opportunities for Caredx and BioLife Solutions

0.03

Correlation Coefficient

Caredx  BioLife Solutions

Significant diversification

The 3 months correlation between Caredx and BioLife is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Caredx Inc and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions and Caredx 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 Caredx Inc are associated (or correlated) with BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of Caredx i.e., Caredx and BioLife Solutions go up and down completely randomly.

Pair Corralation between Caredx and BioLife Solutions

Given the investment horizon of 90 days Caredx Inc is expected to generate 1.35 times more return on investment than BioLife Solutions. However, Caredx is 1.35 times more volatile than BioLife Solutions. It trades about 0.06 of its potential returns per unit of risk. BioLife Solutions is currently generating about 0.04 per unit of risk. If you would invest  1,161  in Caredx Inc on September 10, 2024 and sell it today you would earn a total of  1,343  from holding Caredx Inc or generate 115.68% return on investment over 90 days.

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

Caredx Inc  vs.  BioLife Solutions

Caredx Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caredx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BioLife Solutions

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BioLife Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BioLife Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caredx and BioLife Solutions

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

The idea behind Caredx Inc and BioLife Solutions 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.