Correlation Between Guardian Capital and First Trust

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

By analyzing existing cross correlation between Guardian Capital Group and First Trust High, you can compare the effects of market volatilities on Guardian Capital and First Trust 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 Guardian Capital with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian Capital and First Trust.

Diversification Opportunities for Guardian Capital and First Trust

0.23

Correlation Coefficient

Guardian Capital  First Trust

Modest diversification

The 3 months correlation between Guardian and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Capital Group and First Trust High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust High and Guardian Capital 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 Guardian Capital Group are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust High has no effect on the direction of Guardian Capital i.e., Guardian Capital and First Trust go up and down completely randomly.

Pair Corralation between Guardian Capital and First Trust

Assuming the 90 days horizon Guardian Capital Group is expected to under-perform the First Trust. In addition to that, Guardian Capital is 2.35 times more volatile than First Trust High. It trades about 0.0 of its total potential returns per unit of risk. First Trust High is currently generating about 0.05 per unit of volatility. If you would invest  1,444  in First Trust High on September 15, 2024 and sell it today you would earn a total of  21.00  from holding First Trust High or generate 1.45% return on investment over 90 days.

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

Guardian Capital Group  vs.  First Trust High

Guardian Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guardian Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guardian Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guardian Capital and First Trust

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

The idea behind Guardian Capital Group and First Trust High 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.