Correlation Between Guardian Ultra and Guardian

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

By analyzing existing cross correlation between Guardian Ultra Short Canadian and Guardian i3 Quality, you can compare the effects of market volatilities on Guardian Ultra and Guardian 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 Ultra with a short position of Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian Ultra and Guardian.

Diversification Opportunities for Guardian Ultra and Guardian

0.88

Correlation Coefficient

Guardian Ultra  Guardian

Very poor diversification

The 3 months correlation between Guardian and Guardian is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Ultra Short Canadian and Guardian i3 Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Quality and Guardian Ultra 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 Ultra Short Canadian are associated (or correlated) with Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Quality has no effect on the direction of Guardian Ultra i.e., Guardian Ultra and Guardian go up and down completely randomly.

Pair Corralation between Guardian Ultra and Guardian

Assuming the 90 days trading horizon Guardian Ultra is expected to generate 10.64 times less return on investment than Guardian. But when comparing it to its historical volatility, Guardian Ultra Short Canadian is 51.86 times less risky than Guardian. It trades about 0.77 of its potential returns per unit of risk. Guardian i3 Quality is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,917  in Guardian i3 Quality on September 15, 2024 and sell it today you would earn a total of  305.00  from holding Guardian i3 Quality or generate 10.46% return on investment over 90 days.

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

Guardian Ultra Short Canadian  vs.  Guardian i3 Quality

Guardian Ultra Short

Risk-Adjusted Performance

60 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Ultra Short Canadian are ranked lower than 60 (%) 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.

Guardian i3 Quality

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian i3 Quality are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guardian Ultra and Guardian

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

The idea behind Guardian Ultra Short Canadian and Guardian i3 Quality 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.