Correlation Between Ford and Guardant Health
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Guardant Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Guardant Health, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Guardant Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Guardant Health.
Diversification Opportunities for Ford and Guardant Health
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Guardant is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health and Ford 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 Ford Motor 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 Ford i.e., Ford and Guardant Health go up and down completely randomly.
Pair Corralation between Ford and Guardant Health
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Guardant Health. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.62 times less risky than Guardant Health. The stock trades about -0.18 of its potential returns per unit of risk. The Guardant Health is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,920 in Guardant Health on February 9, 2024 and sell it today you would lose (56.00) from holding Guardant Health or give up 2.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Guardant Health
Performance |
| Timeline |
| Ford Motor |
| Guardant Health |
Ford and Guardant Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Guardant Health
The main advantage of trading using opposite Ford and Guardant Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Guardant Health vs. EXACT Sciences | Guardant Health vs. Illumina | Guardant Health vs. Twist Bioscience Corp | Guardant Health vs. Qiagen NV |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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