Correlation Between Danaher and Caredx

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

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

Diversification Opportunities for Danaher and Caredx

0.26

Correlation Coefficient

Danaher  Caredx

Modest diversification

The 3 months correlation between Danaher and Caredx is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and Caredx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caredx Inc and Danaher 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 Danaher are associated (or correlated) with Caredx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caredx Inc has no effect on the direction of Danaher i.e., Danaher and Caredx go up and down completely randomly.

Pair Corralation between Danaher and Caredx

Considering the 90-day investment horizon Danaher is expected to under-perform the Caredx. But the stock apears to be less risky and, when comparing its historical volatility, Danaher is 2.22 times less risky than Caredx. The stock trades about -0.05 of its potential returns per unit of risk. The Caredx Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,055  in Caredx Inc on December 19, 2024 and sell it today you would lose (184.00) from holding Caredx Inc or give up 8.95% of portfolio value over 90 days.

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

Danaher  vs.  Caredx Inc

Danaher

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Caredx Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caredx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Caredx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Danaher and Caredx

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

The idea behind Danaher and Caredx Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.