Correlation Between Guardian Canadian and IShares SPTSX

Can any of the company-specific risk be diversified away by investing in both Guardian Canadian and IShares SPTSX 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 IShares SPTSX 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 iShares SPTSX 60, you can compare the effects of market volatilities on Guardian Canadian and IShares SPTSX 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 IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian Canadian and IShares SPTSX.

Diversification Opportunities for Guardian Canadian and IShares SPTSX

0.95

Correlation Coefficient

Guardian Canadian  IShares SPTSX

Almost no diversification

The 3 months correlation between Guardian and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Canadian Sector and iShares SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX 60 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 IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX 60 has no effect on the direction of Guardian Canadian i.e., Guardian Canadian and IShares SPTSX go up and down completely randomly.

Pair Corralation between Guardian Canadian and IShares SPTSX

Assuming the 90 days trading horizon Guardian Canadian Sector is expected to generate 1.05 times more return on investment than IShares SPTSX. However, Guardian Canadian is 1.05 times more volatile than iShares SPTSX 60. It trades about 0.24 of its potential returns per unit of risk. iShares SPTSX 60 is currently generating about 0.24 per unit of risk. If you would invest  2,532  in Guardian Canadian Sector on September 18, 2024 and sell it today you would earn a total of  199.00  from holding Guardian Canadian Sector or generate 7.86% return on investment over 90 days.

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

Guardian Canadian Sector  vs.  iShares SPTSX 60

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.

iShares SPTSX 60

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX 60 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guardian Canadian and IShares SPTSX

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

The idea behind Guardian Canadian Sector and iShares SPTSX 60 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.