Correlation Between Guardant Health and Aveanna Healthcare

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

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

Diversification Opportunities for Guardant Health and Aveanna Healthcare

0.66

Correlation Coefficient

Guardant Health  Aveanna Healthcare

Poor diversification

The 3 months correlation between Guardant and Aveanna is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Aveanna Healthcare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveanna Healthcare 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 Aveanna Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveanna Healthcare has no effect on the direction of Guardant Health i.e., Guardant Health and Aveanna Healthcare go up and down completely randomly.

Pair Corralation between Guardant Health and Aveanna Healthcare

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 16.6 times less return on investment than Aveanna Healthcare. But when comparing it to its historical volatility, Guardant Health is 1.34 times less risky than Aveanna Healthcare. It trades about 0.01 of its potential returns per unit of risk. Aveanna Healthcare Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  87.00  in Aveanna Healthcare Holdings on September 2, 2024 and sell it today you would earn a total of  494.00  from holding Aveanna Healthcare Holdings or generate 567.82% return on investment over 90 days.

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

Guardant Health  vs.  Aveanna Healthcare Holdings

Guardant Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 13 (%) 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.

Aveanna Healthcare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aveanna Healthcare Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Aveanna Healthcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guardant Health and Aveanna Healthcare

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

The idea behind Guardant Health and Aveanna Healthcare 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.