Correlation Between Guardant Health and ADMA Biologics

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

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

Diversification Opportunities for Guardant Health and ADMA Biologics

0.78

Correlation Coefficient

Guardant Health  ADMA Biologics

Poor diversification

The 3 months correlation between Guardant and ADMA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and ADMA Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADMA Biologics and Guardant Health 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 Guardant Health are associated (or correlated) with ADMA Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADMA Biologics has no effect on the direction of Guardant Health i.e., Guardant Health and ADMA Biologics go up and down completely randomly.

Pair Corralation between Guardant Health and ADMA Biologics

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.76 times less return on investment than ADMA Biologics. In addition to that, Guardant Health is 1.18 times more volatile than ADMA Biologics. It trades about 0.11 of its total potential returns per unit of risk. ADMA Biologics is currently generating about 0.23 per unit of volatility. If you would invest  552.00  in ADMA Biologics on February 27, 2024 and sell it today you would earn a total of  395.00  from holding ADMA Biologics or generate 71.56% return on investment over 90 days.

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

Guardant Health  vs.  ADMA Biologics

Guardant Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ADMA Biologics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ADMA Biologics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, ADMA Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and ADMA Biologics

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

The idea behind Guardant Health and ADMA Biologics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.