Correlation Between Natera and T2 Biosystms

Can any of the company-specific risk be diversified away by investing in both Natera and T2 Biosystms 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 T2 Biosystms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Natera Inc and T2 Biosystms, you can compare the effects of market volatilities on Natera and T2 Biosystms 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 T2 Biosystms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natera and T2 Biosystms.

Diversification Opportunities for Natera and T2 Biosystms

0.51

Correlation Coefficient

Natera  T2 Biosystms

Very weak diversification

The 3 months correlation between Natera and TTOO is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and T2 Biosystms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T2 Biosystms 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 T2 Biosystms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T2 Biosystms has no effect on the direction of Natera i.e., Natera and T2 Biosystms go up and down completely randomly.

Pair Corralation between Natera and T2 Biosystms

Given the investment horizon of 90 days Natera Inc is expected to under-perform the T2 Biosystms. But the stock apears to be less risky and, when comparing its historical volatility, Natera Inc is 8.95 times less risky than T2 Biosystms. The stock trades about -0.03 of its potential returns per unit of risk. The T2 Biosystms is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  35.00  in T2 Biosystms on December 20, 2024 and sell it today you would lose (17.00) from holding T2 Biosystms or give up 48.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.19%
Values	Daily Returns

Natera Inc  vs.  T2 Biosystms

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.

T2 Biosystms

Risk-Adjusted Performance

Weak

Over the last 90 days T2 Biosystms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, T2 Biosystms displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natera and T2 Biosystms

The main advantage of trading using opposite Natera and T2 Biosystms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natera position performs unexpectedly, T2 Biosystms 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 T2 Biosystms will offset losses from the drop in T2 Biosystms' long position.

The idea behind Natera Inc and T2 Biosystms 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.