Correlation Between Illumina and Natera

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

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

Diversification Opportunities for Illumina and Natera

0.7

Correlation Coefficient

Illumina  Natera

Poor diversification

The 3 months correlation between Illumina and Natera is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera 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 Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of Illumina i.e., Illumina and Natera go up and down completely randomly.

Pair Corralation between Illumina and Natera

Given the investment horizon of 90 days Illumina is expected to under-perform the Natera. But the stock apears to be less risky and, when comparing its historical volatility, Illumina is 1.02 times less risky than Natera. The stock trades about -0.29 of its potential returns per unit of risk. The Natera Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  15,855  in Natera Inc on December 29, 2024 and sell it today you would lose (1,461) from holding Natera Inc or give up 9.21% of portfolio value over 90 days.

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

Illumina  vs.  Natera Inc

Illumina

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Natera Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natera Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Illumina and Natera

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

The idea behind Illumina and Natera 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.