Correlation Between Guardant Health and Burning Rock

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

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

Diversification Opportunities for Guardant Health and Burning Rock

0.87

Correlation Coefficient

Guardant Health  Burning Rock

Very poor diversification

The 3 months correlation between Guardant and Burning is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Burning Rock Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burning Rock Biotech 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 Burning Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burning Rock Biotech has no effect on the direction of Guardant Health i.e., Guardant Health and Burning Rock go up and down completely randomly.

Pair Corralation between Guardant Health and Burning Rock

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 0.74 times more return on investment than Burning Rock. However, Guardant Health is 1.35 times less risky than Burning Rock. It trades about 0.02 of its potential returns per unit of risk. Burning Rock Biotech is currently generating about -0.04 per unit of risk. If you would invest  2,784  in Guardant Health on October 3, 2024 and sell it today you would earn a total of  271.00  from holding Guardant Health or generate 9.73% return on investment over 90 days.

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

Guardant Health  vs.  Burning Rock Biotech

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 weak technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Burning Rock Biotech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and Burning Rock

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

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