Correlation Between Illumina and Guardant Health

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

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

Diversification Opportunities for Illumina and Guardant Health

0.78

Correlation Coefficient

Illumina  Guardant Health

Poor diversification

The 3 months correlation between Illumina and Guardant is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Guardant Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardant Health and Illumina 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 Illumina 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 Illumina i.e., Illumina and Guardant Health go up and down completely randomly.

Pair Corralation between Illumina and Guardant Health

Given the investment horizon of 90 days Illumina is expected to generate 0.48 times more return on investment than Guardant Health. However, Illumina is 2.07 times less risky than Guardant Health. It trades about -0.18 of its potential returns per unit of risk. Guardant Health is currently generating about -0.1 per unit of risk. If you would invest  13,272  in Illumina on January 30, 2024 and sell it today you would lose (1,044) from holding Illumina or give up 7.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Illumina  vs.  Guardant Health

Illumina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Illumina has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Guardant Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Illumina and Guardant Health

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

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..