Correlation Between GUARDANT HEALTH and Takeda Pharmaceutical

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

By analyzing existing cross correlation between GUARDANT HEALTH CL and Takeda Pharmaceutical, you can compare the effects of market volatilities on GUARDANT HEALTH and Takeda Pharmaceutical 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 Takeda Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUARDANT HEALTH and Takeda Pharmaceutical.

Diversification Opportunities for GUARDANT HEALTH and Takeda Pharmaceutical

-0.26

Correlation Coefficient

GUARDANT HEALTH  Takeda Pharmaceutical

Very good diversification

The 3 months correlation between GUARDANT and Takeda is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding GUARDANT HEALTH CL and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 CL are associated (or correlated) with Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of GUARDANT HEALTH i.e., GUARDANT HEALTH and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between GUARDANT HEALTH and Takeda Pharmaceutical

Assuming the 90 days horizon GUARDANT HEALTH CL is expected to generate 3.14 times more return on investment than Takeda Pharmaceutical. However, GUARDANT HEALTH is 3.14 times more volatile than Takeda Pharmaceutical. It trades about 0.18 of its potential returns per unit of risk. Takeda Pharmaceutical is currently generating about -0.04 per unit of risk. If you would invest  2,025  in GUARDANT HEALTH CL on September 27, 2024 and sell it today you would earn a total of  1,019  from holding GUARDANT HEALTH CL or generate 50.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

GUARDANT HEALTH CL  vs.  Takeda Pharmaceutical

GUARDANT HEALTH CL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 13 (%) 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.

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GUARDANT HEALTH and Takeda Pharmaceutical

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

The idea behind GUARDANT HEALTH CL and Takeda Pharmaceutical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.