Correlation Between Guardant Health and OraSure Technologies

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

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

Diversification Opportunities for Guardant Health and OraSure Technologies

0.31

Correlation Coefficient

Guardant Health  OraSure Technologies

Weak diversification

The 3 months correlation between Guardant and OraSure is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and OraSure Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OraSure Technologies 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 OraSure Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OraSure Technologies has no effect on the direction of Guardant Health i.e., Guardant Health and OraSure Technologies go up and down completely randomly.

Pair Corralation between Guardant Health and OraSure Technologies

Allowing for the 90-day total investment horizon Guardant Health is expected to under-perform the OraSure Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Guardant Health is 1.69 times less risky than OraSure Technologies. The stock trades about -0.16 of its potential returns per unit of risk. The OraSure Technologies is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  391.00  in OraSure Technologies on December 4, 2024 and sell it today you would lose (45.00) from holding OraSure Technologies or give up 11.51% of portfolio value over 90 days.

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

Guardant Health  vs.  OraSure Technologies

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.

OraSure Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days OraSure Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, OraSure Technologies is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Guardant Health and OraSure Technologies

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

The idea behind Guardant Health and OraSure Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.