Correlation Between US FOODS and GUARDANT HEALTH

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

By analyzing existing cross correlation between US FOODS HOLDING and GUARDANT HEALTH CL, you can compare the effects of market volatilities on US FOODS 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 US FOODS with a short position of GUARDANT HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of US FOODS and GUARDANT HEALTH.

Diversification Opportunities for US FOODS and GUARDANT HEALTH

0.96

Correlation Coefficient

US FOODS  GUARDANT HEALTH

Almost no diversification

The 3 months correlation between UFH and GUARDANT is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL and US FOODS 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 US FOODS HOLDING 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 CL has no effect on the direction of US FOODS i.e., US FOODS and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between US FOODS and GUARDANT HEALTH

Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 0.37 times more return on investment than GUARDANT HEALTH. However, US FOODS HOLDING is 2.72 times less risky than GUARDANT HEALTH. It trades about 0.1 of its potential returns per unit of risk. GUARDANT HEALTH CL is currently generating about 0.03 per unit of risk. If you would invest  3,220  in US FOODS HOLDING on September 24, 2024 and sell it today you would earn a total of  3,280  from holding US FOODS HOLDING or generate 101.86% return on investment over 90 days.

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

US FOODS HOLDING  vs.  GUARDANT HEALTH CL

US FOODS HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

GUARDANT HEALTH CL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 11 (%) 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.

Pair Trading with US FOODS and GUARDANT HEALTH

The main advantage of trading using opposite US FOODS and GUARDANT HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US FOODS 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 US FOODS HOLDING and GUARDANT HEALTH CL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.