Correlation Between DAIRY FARM and GUARDANT HEALTH
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM 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 DAIRY FARM and GUARDANT HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and GUARDANT HEALTH CL, you can compare the effects of market volatilities on DAIRY FARM 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 DAIRY FARM with a short position of GUARDANT HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and GUARDANT HEALTH.
Diversification Opportunities for DAIRY FARM and GUARDANT HEALTH
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DAIRY and GUARDANT is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL 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 DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and GUARDANT HEALTH go up and down completely randomly.
Pair Corralation between DAIRY FARM and GUARDANT HEALTH
Assuming the 90 days trading horizon DAIRY FARM is expected to generate 1.33 times less return on investment than GUARDANT HEALTH. But when comparing it to its historical volatility, DAIRY FARM INTL is 1.69 times less risky than GUARDANT HEALTH. It trades about 0.23 of its potential returns per unit of risk. GUARDANT HEALTH CL is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,252 in GUARDANT HEALTH CL on September 12, 2024 and sell it today you would earn a total of 1,167 from holding GUARDANT HEALTH CL or generate 51.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. GUARDANT HEALTH CL
Performance |
| Timeline |
| DAIRY FARM INTL |
| GUARDANT HEALTH CL |
DAIRY FARM and GUARDANT HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and GUARDANT HEALTH
The main advantage of trading using opposite DAIRY FARM and GUARDANT HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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.| GUARDANT HEALTH vs. DexCom Inc | GUARDANT HEALTH vs. IDEXX Laboratories | GUARDANT HEALTH vs. Superior Plus Corp | GUARDANT HEALTH vs. NMI Holdings |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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