Correlation Between Guardant Health and Twist Bioscience

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

By analyzing existing cross correlation between Guardant Health and Twist Bioscience Corp, you can compare the effects of market volatilities on Guardant Health and Twist Bioscience 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 Twist Bioscience. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardant Health and Twist Bioscience.

Diversification Opportunities for Guardant Health and Twist Bioscience

0.81

Correlation Coefficient

Guardant Health  Twist Bioscience

Very poor diversification

The 3 months correlation between Guardant and Twist is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Twist Bioscience Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twist Bioscience Corp 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 Twist Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twist Bioscience Corp has no effect on the direction of Guardant Health i.e., Guardant Health and Twist Bioscience go up and down completely randomly.

Pair Corralation between Guardant Health and Twist Bioscience

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 0.68 times more return on investment than Twist Bioscience. However, Guardant Health is 1.47 times less risky than Twist Bioscience. It trades about 0.36 of its potential returns per unit of risk. Twist Bioscience Corp is currently generating about 0.2 per unit of risk. If you would invest  1,819  in Guardant Health on February 28, 2024 and sell it today you would earn a total of  797.00  from holding Guardant Health or generate 43.82% return on investment over 90 days.

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

Guardant Health  vs.  Twist Bioscience Corp

Guardant Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Twist Bioscience Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Twist Bioscience Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Twist Bioscience may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Guardant Health and Twist Bioscience

The main advantage of trading using opposite Guardant Health and Twist Bioscience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardant Health position performs unexpectedly, Twist Bioscience 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 Twist Bioscience will offset losses from the drop in Twist Bioscience's long position.

The idea behind Guardant Health and Twist Bioscience Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.