Correlation Between Thermo Fisher and GUARDANT HEALTH

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

By analyzing existing cross correlation between Thermo Fisher Scientific and GUARDANT HEALTH CL, you can compare the effects of market volatilities on Thermo Fisher 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 Thermo Fisher with a short position of GUARDANT HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermo Fisher and GUARDANT HEALTH.

Diversification Opportunities for Thermo Fisher and GUARDANT HEALTH

0.33

Correlation Coefficient

Thermo Fisher  GUARDANT HEALTH

Weak diversification

The 3 months correlation between Thermo and GUARDANT is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL and Thermo Fisher 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 Thermo Fisher Scientific 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 CL has no effect on the direction of Thermo Fisher i.e., Thermo Fisher and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between Thermo Fisher and GUARDANT HEALTH

Assuming the 90 days horizon Thermo Fisher Scientific is expected to under-perform the GUARDANT HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, Thermo Fisher Scientific is 2.93 times less risky than GUARDANT HEALTH. The stock trades about -0.05 of its potential returns per unit of risk. The GUARDANT HEALTH CL is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,895  in GUARDANT HEALTH CL on December 30, 2024 and sell it today you would earn a total of  1,220  from holding GUARDANT HEALTH CL or generate 42.14% return on investment over 90 days.

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

Thermo Fisher Scientific  vs.  GUARDANT HEALTH CL

Thermo Fisher Scientific

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GUARDANT HEALTH CL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thermo Fisher and GUARDANT HEALTH

The main advantage of trading using opposite Thermo Fisher and GUARDANT HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermo Fisher 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 Thermo Fisher Scientific and GUARDANT HEALTH CL 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.