Correlation Between Natera and Guardant Health

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

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

Diversification Opportunities for Natera and Guardant Health

0.83

Correlation Coefficient

Natera  Guardant Health

Very poor diversification

The 3 months correlation between Natera and Guardant is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health 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 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 Natera i.e., Natera and Guardant Health go up and down completely randomly.

Pair Corralation between Natera and Guardant Health

Given the investment horizon of 90 days Natera Inc is expected to generate 0.89 times more return on investment than Guardant Health. However, Natera Inc is 1.12 times less risky than Guardant Health. It trades about 0.2 of its potential returns per unit of risk. Guardant Health is currently generating about 0.17 per unit of risk. If you would invest  11,398  in Natera Inc on September 1, 2024 and sell it today you would earn a total of  5,380  from holding Natera Inc or generate 47.2% return on investment over 90 days.

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

Natera Inc  vs.  Guardant Health

Natera Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Natera and Guardant Health

The main advantage of trading using opposite Natera and Guardant Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natera 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 Natera Inc 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.