Correlation Between Guardant Health and Alphatec Holdings

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

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

Diversification Opportunities for Guardant Health and Alphatec Holdings

0.94

Correlation Coefficient

Guardant Health  Alphatec Holdings

Almost no diversification

The 3 months correlation between Guardant and Alphatec is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Alphatec Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphatec Holdings 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 Alphatec Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphatec Holdings has no effect on the direction of Guardant Health i.e., Guardant Health and Alphatec Holdings go up and down completely randomly.

Pair Corralation between Guardant Health and Alphatec Holdings

Allowing for the 90-day total investment horizon Guardant Health is expected to under-perform the Alphatec Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Guardant Health is 1.1 times less risky than Alphatec Holdings. The stock trades about -0.18 of its potential returns per unit of risk. The Alphatec Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Alphatec Holdings on September 26, 2024 and sell it today you would lose (50.00) from holding Alphatec Holdings or give up 5.2% of portfolio value over 90 days.

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

Guardant Health  vs.  Alphatec Holdings

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.

Alphatec Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphatec Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Alphatec Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and Alphatec Holdings

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

The idea behind Guardant Health and Alphatec Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..