Correlation Between Natera and Caredx

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

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

Diversification Opportunities for Natera and Caredx

-0.36

Correlation Coefficient

Natera  Caredx

Very good diversification

The 3 months correlation between Natera and Caredx is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and Caredx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caredx Inc and Natera 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 Natera Inc are associated (or correlated) with Caredx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caredx Inc has no effect on the direction of Natera i.e., Natera and Caredx go up and down completely randomly.

Pair Corralation between Natera and Caredx

Given the investment horizon of 90 days Natera Inc is expected to generate 0.89 times more return on investment than Caredx. However, Natera Inc is 1.12 times less risky than Caredx. It trades about 0.11 of its potential returns per unit of risk. Caredx Inc is currently generating about -0.13 per unit of risk. If you would invest  12,778  in Natera Inc on September 20, 2024 and sell it today you would earn a total of  3,031  from holding Natera Inc or generate 23.72% return on investment over 90 days.

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

Natera Inc  vs.  Caredx Inc

Natera Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Caredx Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caredx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Natera and Caredx

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

The idea behind Natera Inc and Caredx 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.