Correlation Between Guardant Health and Waters

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

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

Diversification Opportunities for Guardant Health and Waters

0.52

Correlation Coefficient

Guardant Health  Waters

Very weak diversification

The 3 months correlation between Guardant and Waters is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Guardant Health i.e., Guardant Health and Waters go up and down completely randomly.

Pair Corralation between Guardant Health and Waters

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.3 times more return on investment than Waters. However, Guardant Health is 1.3 times more volatile than Waters. It trades about 0.17 of its potential returns per unit of risk. Waters is currently generating about 0.08 per unit of risk. If you would invest  2,457  in Guardant Health on September 1, 2024 and sell it today you would earn a total of  1,104  from holding Guardant Health or generate 44.93% return on investment over 90 days.

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

Guardant Health  vs.  Waters

Guardant Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Waters

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardant Health and Waters

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

The idea behind Guardant Health and Waters 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.