Correlation Between Western Asset and Guardian Capital

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

By analyzing existing cross correlation between Western Asset Global and Guardian Capital Group, you can compare the effects of market volatilities on Western Asset and Guardian Capital 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 Western Asset with a short position of Guardian Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Guardian Capital.

Diversification Opportunities for Western Asset and Guardian Capital

0.63

Correlation Coefficient

Western Asset  Guardian Capital

Poor diversification

The 3 months correlation between Western and Guardian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital and Western Asset 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 Western Asset Global are associated (or correlated) with Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of Western Asset i.e., Western Asset and Guardian Capital go up and down completely randomly.

Pair Corralation between Western Asset and Guardian Capital

Considering the 90-day investment horizon Western Asset is expected to generate 11.07 times less return on investment than Guardian Capital. In addition to that, Western Asset is 1.12 times more volatile than Guardian Capital Group. It trades about 0.01 of its total potential returns per unit of risk. Guardian Capital Group is currently generating about 0.12 per unit of volatility. If you would invest  2,882  in Guardian Capital Group on September 5, 2024 and sell it today you would earn a total of  38.00  from holding Guardian Capital Group or generate 1.32% return on investment over 90 days.

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

Western Asset Global  vs.  Guardian Capital Group

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guardian Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guardian Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guardian Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Asset and Guardian Capital

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

The idea behind Western Asset Global and Guardian Capital Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.