Correlation Between Guardian Canadian and Guardian Ultra

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

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

Diversification Opportunities for Guardian Canadian and Guardian Ultra

-0.69

Correlation Coefficient

Guardian Canadian  Guardian Ultra

Excellent diversification

The 3 months correlation between Guardian and Guardian is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Canadian Focused and Guardian Ultra Short Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Ultra Short and Guardian 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 Guardian Canadian Focused are associated (or correlated) with Guardian Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Ultra Short has no effect on the direction of Guardian Canadian i.e., Guardian Canadian and Guardian Ultra go up and down completely randomly.

Pair Corralation between Guardian Canadian and Guardian Ultra

Assuming the 90 days trading horizon Guardian Canadian Focused is expected to under-perform the Guardian Ultra. In addition to that, Guardian Canadian is 19.75 times more volatile than Guardian Ultra Short Canadian. It trades about -0.08 of its total potential returns per unit of risk. Guardian Ultra Short Canadian is currently generating about 0.24 per unit of volatility. If you would invest  4,964  in Guardian Ultra Short Canadian on December 4, 2024 and sell it today you would earn a total of  39.00  from holding Guardian Ultra Short Canadian or generate 0.79% return on investment over 90 days.

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

Guardian Canadian Focused  vs.  Guardian Ultra Short Canadian

Guardian Canadian Focused

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian Canadian Focused has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Guardian Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Guardian Ultra Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Ultra Short Canadian are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Guardian Ultra is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Guardian Canadian and Guardian Ultra

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

The idea behind Guardian Canadian Focused and Guardian Ultra Short Canadian 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.