Correlation Between Danaher and EXACT Sciences

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

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

Diversification Opportunities for Danaher and EXACT Sciences

-0.65

Correlation Coefficient

Danaher  EXACT Sciences

Excellent diversification

The 3 months correlation between Danaher and EXACT is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and EXACT Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXACT Sciences and Danaher 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 Danaher 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 Danaher i.e., Danaher and EXACT Sciences go up and down completely randomly.

Pair Corralation between Danaher and EXACT Sciences

Considering the 90-day investment horizon Danaher is expected to generate 1.94 times less return on investment than EXACT Sciences. But when comparing it to its historical volatility, Danaher is 2.07 times less risky than EXACT Sciences. It trades about 0.03 of its potential returns per unit of risk. EXACT Sciences is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,714  in EXACT Sciences on March 5, 2024 and sell it today you would earn a total of  831.00  from holding EXACT Sciences or generate 22.37% return on investment over 90 days.

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

Danaher  vs.  EXACT Sciences

Danaher

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

EXACT Sciences

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Danaher and EXACT Sciences

The main advantage of trading using opposite Danaher and EXACT Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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 Danaher 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.