Correlation Between Guardant Health and NexGel Warrant

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

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

Diversification Opportunities for Guardant Health and NexGel Warrant

0.41

Correlation Coefficient

Guardant Health  NexGel Warrant

Very weak diversification

The 3 months correlation between Guardant and NexGel is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and NexGel Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGel Warrant 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 NexGel Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGel Warrant has no effect on the direction of Guardant Health i.e., Guardant Health and NexGel Warrant go up and down completely randomly.

Pair Corralation between Guardant Health and NexGel Warrant

Allowing for the 90-day total investment horizon Guardant Health is expected to under-perform the NexGel Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Guardant Health is 3.48 times less risky than NexGel Warrant. The stock trades about -0.03 of its potential returns per unit of risk. The NexGel Warrant is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  48.00  in NexGel Warrant on September 23, 2024 and sell it today you would earn a total of  32.00  from holding NexGel Warrant or generate 66.67% return on investment over 90 days.

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

Guardant Health  vs.  NexGel Warrant

Guardant Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 11 (%) 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.

NexGel Warrant

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Guardant Health and NexGel Warrant

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

The idea behind Guardant Health and NexGel Warrant 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.