Correlation Between ULTRA CLEAN and GUARDANT HEALTH

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

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

Diversification Opportunities for ULTRA CLEAN and GUARDANT HEALTH

0.76

Correlation Coefficient

ULTRA CLEAN  GUARDANT HEALTH

Poor diversification

The 3 months correlation between ULTRA and GUARDANT is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS 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 ULTRA CLEAN 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 ULTRA CLEAN HLDGS 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 ULTRA CLEAN i.e., ULTRA CLEAN and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and GUARDANT HEALTH

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 20.55 times less return on investment than GUARDANT HEALTH. But when comparing it to its historical volatility, ULTRA CLEAN HLDGS is 1.99 times less risky than GUARDANT HEALTH. It trades about 0.05 of its potential returns per unit of risk. GUARDANT HEALTH CL is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  2,985  in GUARDANT HEALTH CL on October 26, 2024 and sell it today you would earn a total of  1,518  from holding GUARDANT HEALTH CL or generate 50.85% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  GUARDANT HEALTH CL

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, ULTRA CLEAN may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GUARDANT HEALTH CL

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 27 (%) 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 ULTRA CLEAN and GUARDANT HEALTH

The main advantage of trading using opposite ULTRA CLEAN and GUARDANT HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ULTRA CLEAN 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 ULTRA CLEAN HLDGS 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.