Correlation Between Guardant Health and EXACT Sciences

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

Diversification Opportunities for Guardant Health and EXACT Sciences

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Guardant and EXACT is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and EXACT Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXACT Sciences and Guardant Health 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 Guardant Health are associated (or correlated) with EXACT Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXACT Sciences has no effect on the direction of Guardant Health i.e., Guardant Health and EXACT Sciences go up and down completely randomly.

Pair Corralation between Guardant Health and EXACT Sciences

Allowing for the 90-day total investment horizon Guardant Health is expected to under-perform the EXACT Sciences. In addition to that, Guardant Health is 1.22 times more volatile than EXACT Sciences. It trades about -0.17 of its total potential returns per unit of risk. EXACT Sciences is currently generating about 0.01 per unit of volatility. If you would invest  6,686  in EXACT Sciences on December 29, 2023 and sell it today you would earn a total of  2.00  from holding EXACT Sciences or generate 0.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Guardant Health  vs.  EXACT Sciences

 Performance 
       Timeline  
Guardant Health 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Guardant Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal 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.
EXACT Sciences 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days EXACT Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Guardant Health and EXACT Sciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guardant Health and EXACT Sciences

The main advantage of trading using opposite Guardant Health and EXACT Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardant Health position performs unexpectedly, EXACT Sciences 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 EXACT Sciences will offset losses from the drop in EXACT Sciences' long position.
The idea behind Guardant Health and EXACT Sciences 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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