Correlation Between Guardant Health and Globus Medical

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

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

Diversification Opportunities for Guardant Health and Globus Medical

0.9

Correlation Coefficient

Guardant Health  Globus Medical

Almost no diversification

The 3 months correlation between Guardant and Globus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Globus Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globus Medical 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 Globus Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globus Medical has no effect on the direction of Guardant Health i.e., Guardant Health and Globus Medical go up and down completely randomly.

Pair Corralation between Guardant Health and Globus Medical

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.37 times less return on investment than Globus Medical. In addition to that, Guardant Health is 1.99 times more volatile than Globus Medical. It trades about 0.04 of its total potential returns per unit of risk. Globus Medical is currently generating about 0.1 per unit of volatility. If you would invest  5,329  in Globus Medical on September 24, 2024 and sell it today you would earn a total of  2,934  from holding Globus Medical or generate 55.06% return on investment over 90 days.

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

Guardant Health  vs.  Globus Medical

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.

Globus Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globus Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Globus Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and Globus Medical

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

The idea behind Guardant Health and Globus Medical 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.