Correlation Between Illumina and Caredx

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

By analyzing existing cross correlation between Illumina and Caredx Inc, you can compare the effects of market volatilities on Illumina and Caredx 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 Illumina with a short position of Caredx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illumina and Caredx.

Diversification Opportunities for Illumina and Caredx

0.12

Correlation Coefficient

Illumina  Caredx

Average diversification

The 3 months correlation between Illumina and Caredx is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Caredx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caredx Inc and Illumina 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 Illumina are associated (or correlated) with Caredx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caredx Inc has no effect on the direction of Illumina i.e., Illumina and Caredx go up and down completely randomly.

Pair Corralation between Illumina and Caredx

Given the investment horizon of 90 days Illumina is expected to generate 0.86 times more return on investment than Caredx. However, Illumina is 1.17 times less risky than Caredx. It trades about -0.05 of its potential returns per unit of risk. Caredx Inc is currently generating about -0.18 per unit of risk. If you would invest  13,991  in Illumina on October 6, 2024 and sell it today you would lose (390.00) from holding Illumina or give up 2.79% of portfolio value over 90 days.

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

Illumina  vs.  Caredx Inc

Illumina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Illumina has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Illumina is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Caredx Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caredx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Illumina and Caredx

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

The idea behind Illumina and Caredx Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..