Correlation Between Pacific Biosciences and DexCom

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

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

Diversification Opportunities for Pacific Biosciences and DexCom

0.39

Correlation Coefficient

Pacific Biosciences  DexCom

Weak diversification

The 3 months correlation between Pacific and DexCom is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Biosciences of and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Pacific Biosciences 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 Pacific Biosciences of are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Pacific Biosciences i.e., Pacific Biosciences and DexCom go up and down completely randomly.

Pair Corralation between Pacific Biosciences and DexCom

Given the investment horizon of 90 days Pacific Biosciences of is expected to generate 3.02 times more return on investment than DexCom. However, Pacific Biosciences is 3.02 times more volatile than DexCom Inc. It trades about 0.09 of its potential returns per unit of risk. DexCom Inc is currently generating about -0.24 per unit of risk. If you would invest  187.00  in Pacific Biosciences of on March 8, 2024 and sell it today you would earn a total of  17.00  from holding Pacific Biosciences of or generate 9.09% return on investment over 90 days.

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

Pacific Biosciences of  vs.  DexCom Inc

Pacific Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Biosciences of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

DexCom Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pacific Biosciences and DexCom

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

The idea behind Pacific Biosciences of and DexCom Inc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.