Correlation Between T2 Biosystms and Illumina

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

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

Diversification Opportunities for T2 Biosystms and Illumina

0.39

Correlation Coefficient

T2 Biosystms  Illumina

Weak diversification

The 3 months correlation between TTOO and Illumina is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding T2 Biosystms and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of T2 Biosystms i.e., T2 Biosystms and Illumina go up and down completely randomly.

Pair Corralation between T2 Biosystms and Illumina

Given the investment horizon of 90 days T2 Biosystms is expected to under-perform the Illumina. In addition to that, T2 Biosystms is 3.64 times more volatile than Illumina. It trades about -0.14 of its total potential returns per unit of risk. Illumina is currently generating about -0.21 per unit of volatility. If you would invest  14,753  in Illumina on October 8, 2024 and sell it today you would lose (1,152) from holding Illumina or give up 7.81% of portfolio value over 90 days.

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

T2 Biosystms  vs.  Illumina

T2 Biosystms

Risk-Adjusted Performance

0 of 100

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

Illumina

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, Illumina is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with T2 Biosystms and Illumina

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

The idea behind T2 Biosystms and Illumina 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.