Correlation Between Guardant Health and Koninklijke Philips

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

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

Diversification Opportunities for Guardant Health and Koninklijke Philips

-0.78

Correlation Coefficient

Guardant Health  Koninklijke Philips

Pay attention - limited upside

The 3 months correlation between Guardant and Koninklijke is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Guardant Health i.e., Guardant Health and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Guardant Health and Koninklijke Philips

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.15 times less return on investment than Koninklijke Philips. In addition to that, Guardant Health is 1.64 times more volatile than Koninklijke Philips NV. It trades about 0.03 of its total potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.06 per unit of volatility. If you would invest  1,525  in Koninklijke Philips NV on September 27, 2024 and sell it today you would earn a total of  1,023  from holding Koninklijke Philips NV or generate 67.08% return on investment over 90 days.

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

Guardant Health  vs.  Koninklijke Philips NV

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.

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Guardant Health and Koninklijke Philips

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

The idea behind Guardant Health and Koninklijke Philips NV 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.