Correlation Between Guardian Directed and Guardian Canadian

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

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

Diversification Opportunities for Guardian Directed and Guardian Canadian

0.8

Correlation Coefficient

Guardian Directed  Guardian Canadian

Very poor diversification

The 3 months correlation between Guardian and Guardian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Directed Equity and Guardian Canadian Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Canadian Sector and Guardian Directed 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 Directed Equity are associated (or correlated) with Guardian Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Canadian Sector has no effect on the direction of Guardian Directed i.e., Guardian Directed and Guardian Canadian go up and down completely randomly.

Pair Corralation between Guardian Directed and Guardian Canadian

Assuming the 90 days trading horizon Guardian Directed Equity is expected to generate 1.0 times more return on investment than Guardian Canadian. However, Guardian Directed is 1.0 times more volatile than Guardian Canadian Sector. It trades about -0.04 of its potential returns per unit of risk. Guardian Canadian Sector is currently generating about -0.14 per unit of risk. If you would invest  2,031  in Guardian Directed Equity on December 4, 2024 and sell it today you would lose (6.00) from holding Guardian Directed Equity or give up 0.3% of portfolio value over 90 days.

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

Guardian Directed Equity  vs.  Guardian Canadian Sector

Guardian Directed Equity

Risk-Adjusted Performance

Very Weak

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

Guardian Canadian Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian Canadian Sector 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.

Pair Trading with Guardian Directed and Guardian Canadian

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

The idea behind Guardian Directed Equity and Guardian Canadian Sector 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.