Correlation Between Guardant Health and Penumbra

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

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

Diversification Opportunities for Guardant Health and Penumbra

0.74

Correlation Coefficient

Guardant Health  Penumbra

Poor diversification

The 3 months correlation between Guardant and Penumbra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra 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 Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Guardant Health i.e., Guardant Health and Penumbra go up and down completely randomly.

Pair Corralation between Guardant Health and Penumbra

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.97 times more return on investment than Penumbra. However, Guardant Health is 1.97 times more volatile than Penumbra. It trades about 0.15 of its potential returns per unit of risk. Penumbra is currently generating about 0.09 per unit of risk. If you would invest  3,054  in Guardant Health on December 29, 2024 and sell it today you would earn a total of  1,461  from holding Guardant Health or generate 47.84% 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.  Penumbra

Guardant Health

Risk-Adjusted Performance

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.

Penumbra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and Penumbra

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

The idea behind Guardant Health and Penumbra 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.