Correlation Between Natera and Guardant Health

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

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

Diversification Opportunities for Natera and Guardant Health

0.19

Correlation Coefficient

Natera  Guardant Health

Average diversification

The 3 months correlation between Natera and Guardant is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health and Natera 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 Natera Inc are associated (or correlated) with Guardant Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardant Health has no effect on the direction of Natera i.e., Natera and Guardant Health go up and down completely randomly.

Pair Corralation between Natera and Guardant Health

Given the investment horizon of 90 days Natera Inc is expected to under-perform the Guardant Health. But the stock apears to be less risky and, when comparing its historical volatility, Natera Inc is 1.86 times less risky than Guardant Health. The stock trades about -0.03 of its potential returns per unit of risk. The Guardant Health is currently generating about 0.15 of returns per unit of risk over similar time horizon. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Natera Inc  vs.  Guardant Health

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 somewhat strong basic indicators, Natera is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Natera and Guardant Health

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

The idea behind Natera Inc and Guardant Health 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.