Correlation Between Purpose Canadian and Guardian Canadian

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

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

Diversification Opportunities for Purpose Canadian and Guardian Canadian

0.89

Correlation Coefficient

Purpose Canadian  Guardian Canadian

Very poor diversification

The 3 months correlation between Purpose and Guardian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Canadian Financial and Guardian Canadian Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Canadian Sector and Purpose Canadian 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 Purpose Canadian Financial are associated (or correlated) with Guardian Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Canadian Sector has no effect on the direction of Purpose Canadian i.e., Purpose Canadian and Guardian Canadian go up and down completely randomly.

Pair Corralation between Purpose Canadian and Guardian Canadian

Assuming the 90 days trading horizon Purpose Canadian Financial is expected to generate 0.98 times more return on investment than Guardian Canadian. However, Purpose Canadian Financial is 1.02 times less risky than Guardian Canadian. It trades about 0.29 of its potential returns per unit of risk. Guardian Canadian Sector is currently generating about 0.24 per unit of risk. If you would invest  2,693  in Purpose Canadian Financial on September 14, 2024 and sell it today you would earn a total of  251.00  from holding Purpose Canadian Financial or generate 9.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Purpose Canadian Financial  vs.  Guardian Canadian Sector

Purpose Canadian Fin

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Canadian Financial are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Purpose Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guardian Canadian Sector

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Canadian Sector are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Purpose Canadian and Guardian Canadian

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

The idea behind Purpose Canadian Financial and Guardian Canadian Sector 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .