Correlation Between Guardian Canadian and Guardian Directed

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

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

Diversification Opportunities for Guardian Canadian and Guardian Directed

0.86

Correlation Coefficient

Guardian Canadian  Guardian Directed

Very poor diversification

The 3 months correlation between Guardian and Guardian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Canadian Sector and Guardian Directed Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Directed Premium 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 Sector are associated (or correlated) with Guardian Directed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Directed Premium has no effect on the direction of Guardian Canadian i.e., Guardian Canadian and Guardian Directed go up and down completely randomly.

Pair Corralation between Guardian Canadian and Guardian Directed

Assuming the 90 days trading horizon Guardian Canadian is expected to generate 1.18 times less return on investment than Guardian Directed. In addition to that, Guardian Canadian is 1.06 times more volatile than Guardian Directed Premium. It trades about 0.12 of its total potential returns per unit of risk. Guardian Directed Premium is currently generating about 0.14 per unit of volatility. If you would invest  2,026  in Guardian Directed Premium on October 7, 2024 and sell it today you would earn a total of  101.00  from holding Guardian Directed Premium or generate 4.99% return on investment over 90 days.

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

Guardian Canadian Sector  vs.  Guardian Directed Premium

Guardian Canadian Sector

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Canadian Sector are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Guardian Canadian is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Guardian Directed Premium

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Directed Premium are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guardian Directed is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guardian Canadian and Guardian Directed

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

The idea behind Guardian Canadian Sector and Guardian Directed Premium 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.