Correlation Between Waters and Guardant Health

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

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

Diversification Opportunities for Waters and Guardant Health

0.52

Correlation Coefficient

Waters  Guardant Health

Very weak diversification

The 3 months correlation between Waters and Guardant is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health and Waters 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 Waters 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 has no effect on the direction of Waters i.e., Waters and Guardant Health go up and down completely randomly.

Pair Corralation between Waters and Guardant Health

Considering the 90-day investment horizon Waters is expected to generate 2.79 times less return on investment than Guardant Health. But when comparing it to its historical volatility, Waters is 1.3 times less risky than Guardant Health. It trades about 0.08 of its potential returns per unit of risk. Guardant Health is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,457  in Guardant Health on September 1, 2024 and sell it today you would earn a total of  1,104  from holding Guardant Health or generate 44.93% return on investment over 90 days.

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

Waters  vs.  Guardant Health

Waters

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Guardant Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waters and Guardant Health

The main advantage of trading using opposite Waters and Guardant Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters 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 Waters and Guardant Health 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.