Correlation Between Guardant Health and Illumina

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

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

Diversification Opportunities for Guardant Health and Illumina

0.78

Correlation Coefficient

Guardant Health  Illumina

Poor diversification

The 3 months correlation between Guardant and Illumina is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 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 Guardant Health i.e., Guardant Health and Illumina go up and down completely randomly.

Pair Corralation between Guardant Health and Illumina

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.46 times more return on investment than Illumina. However, Guardant Health is 1.46 times more volatile than Illumina. It trades about 0.0 of its potential returns per unit of risk. Illumina is currently generating about -0.02 per unit of risk. If you would invest  3,133  in Guardant Health on January 30, 2024 and sell it today you would lose (1,398) from holding Guardant Health or give up 44.62% of portfolio value over 90 days.

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

Guardant Health  vs.  Illumina

Guardant Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guardant Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Guardant Health and Illumina

The main advantage of trading using opposite Guardant Health and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardant Health 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 Guardant Health 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.