Correlation Between Guardant Health and Amedisys

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

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

Diversification Opportunities for Guardant Health and Amedisys

-0.75

Correlation Coefficient

Guardant Health  Amedisys

Pay attention - limited upside

The 3 months correlation between Guardant and Amedisys is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys 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 are associated (or correlated) with Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Guardant Health i.e., Guardant Health and Amedisys go up and down completely randomly.

Pair Corralation between Guardant Health and Amedisys

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 3.92 times more return on investment than Amedisys. However, Guardant Health is 3.92 times more volatile than Amedisys. It trades about 0.49 of its potential returns per unit of risk. Amedisys is currently generating about -0.17 per unit of risk. If you would invest  2,179  in Guardant Health on August 30, 2024 and sell it today you would earn a total of  1,331  from holding Guardant Health or generate 61.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Guardant Health  vs.  Amedisys

Guardant Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Amedisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Guardant Health and Amedisys

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

The idea behind Guardant Health and Amedisys 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.