Correlation Between Natera and BioLife Solutions

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

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

Diversification Opportunities for Natera and BioLife Solutions

0.49

Correlation Coefficient

Natera  BioLife Solutions

Very weak diversification

The 3 months correlation between Natera and BioLife is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions and Natera 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 Natera Inc are associated (or correlated) with BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of Natera i.e., Natera and BioLife Solutions go up and down completely randomly.

Pair Corralation between Natera and BioLife Solutions

Given the investment horizon of 90 days Natera Inc is expected to generate 0.9 times more return on investment than BioLife Solutions. However, Natera Inc is 1.11 times less risky than BioLife Solutions. It trades about 0.15 of its potential returns per unit of risk. BioLife Solutions is currently generating about 0.04 per unit of risk. If you would invest  12,651  in Natera Inc on September 13, 2024 and sell it today you would earn a total of  4,061  from holding Natera Inc or generate 32.1% return on investment over 90 days.

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

Natera Inc  vs.  BioLife Solutions

Natera Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

BioLife Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BioLife Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BioLife Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Natera and BioLife Solutions

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

The idea behind Natera Inc and BioLife Solutions 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.