Correlation Between DexCom and Guardant Health

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Can any of the company-specific risk be diversified away by investing in both DexCom 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 DexCom and Guardant Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DexCom Inc and Guardant Health, you can compare the effects of market volatilities on DexCom 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 DexCom with a short position of Guardant Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of DexCom and Guardant Health.

Diversification Opportunities for DexCom and Guardant Health

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between DexCom and Guardant is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health and DexCom 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 DexCom 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 DexCom i.e., DexCom and Guardant Health go up and down completely randomly.

Pair Corralation between DexCom and Guardant Health

Given the investment horizon of 90 days DexCom Inc is expected to generate 0.63 times more return on investment than Guardant Health. However, DexCom Inc is 1.58 times less risky than Guardant Health. It trades about 0.02 of its potential returns per unit of risk. Guardant Health is currently generating about -0.04 per unit of risk. If you would invest  12,650  in DexCom Inc on December 29, 2023 and sell it today you would earn a total of  1,220  from holding DexCom Inc or generate 9.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DexCom Inc  vs.  Guardant Health

 Performance 
       Timeline  
DexCom Inc 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, DexCom displayed solid returns over the last few months and may actually be approaching a breakup point.
Guardant Health 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Guardant Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

DexCom and Guardant Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DexCom and Guardant Health

The main advantage of trading using opposite DexCom and Guardant Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DexCom 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 DexCom 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.
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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