Correlation Between Guardant Health and Nexgel

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

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

Diversification Opportunities for Guardant Health and Nexgel

0.71

Correlation Coefficient

Guardant Health  Nexgel

Poor diversification

The 3 months correlation between Guardant and Nexgel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Nexgel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexgel Inc 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 Nexgel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexgel Inc has no effect on the direction of Guardant Health i.e., Guardant Health and Nexgel go up and down completely randomly.

Pair Corralation between Guardant Health and Nexgel

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.94 times less return on investment than Nexgel. But when comparing it to its historical volatility, Guardant Health is 1.39 times less risky than Nexgel. It trades about 0.16 of its potential returns per unit of risk. Nexgel Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  258.00  in Nexgel Inc on September 28, 2024 and sell it today you would earn a total of  221.00  from holding Nexgel Inc or generate 85.66% 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.  Nexgel Inc

Guardant Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nexgel Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nexgel Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Nexgel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and Nexgel

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

The idea behind Guardant Health and Nexgel Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..