Correlation Between Guardant Health and Butterfly Network

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

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

Diversification Opportunities for Guardant Health and Butterfly Network

0.73

Correlation Coefficient

Guardant Health  Butterfly Network

Poor diversification

The 3 months correlation between Guardant and Butterfly is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Butterfly Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butterfly Network 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 Butterfly Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butterfly Network has no effect on the direction of Guardant Health i.e., Guardant Health and Butterfly Network go up and down completely randomly.

Pair Corralation between Guardant Health and Butterfly Network

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.84 times less return on investment than Butterfly Network. But when comparing it to its historical volatility, Guardant Health is 1.67 times less risky than Butterfly Network. It trades about 0.04 of its potential returns per unit of risk. Butterfly Network is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Butterfly Network on December 4, 2024 and sell it today you would earn a total of  112.00  from holding Butterfly Network or generate 58.64% 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.  Butterfly Network

Guardant Health

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 4 (%) 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.

Butterfly Network

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Butterfly Network is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guardant Health and Butterfly Network

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

The idea behind Guardant Health and Butterfly Network 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.