Correlation Between T2 Biosystms and Danaher

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

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

Diversification Opportunities for T2 Biosystms and Danaher

0.73

Correlation Coefficient

T2 Biosystms  Danaher

Poor diversification

The 3 months correlation between TTOO and Danaher is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding T2 Biosystms and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher and T2 Biosystms 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 T2 Biosystms are associated (or correlated) with Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of T2 Biosystms i.e., T2 Biosystms and Danaher go up and down completely randomly.

Pair Corralation between T2 Biosystms and Danaher

Given the investment horizon of 90 days T2 Biosystms is expected to generate 13.43 times more return on investment than Danaher. However, T2 Biosystms is 13.43 times more volatile than Danaher. It trades about 0.02 of its potential returns per unit of risk. Danaher is currently generating about -0.05 per unit of risk. If you would invest  35.00  in T2 Biosystms on December 18, 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	Significant
Accuracy	73.33%
Values	Daily Returns

T2 Biosystms  vs.  Danaher

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.

Danaher

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with T2 Biosystms and Danaher

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

The idea behind T2 Biosystms and Danaher 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.