Correlation Between Guardian Directed and BMO Covered

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

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

Diversification Opportunities for Guardian Directed and BMO Covered

-0.36

Correlation Coefficient

Guardian Directed  BMO Covered

Very good diversification

The 3 months correlation between Guardian and BMO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Directed Premium and BMO Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Covered Call 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 Premium are associated (or correlated) with BMO Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Covered Call has no effect on the direction of Guardian Directed i.e., Guardian Directed and BMO Covered go up and down completely randomly.

Pair Corralation between Guardian Directed and BMO Covered

Assuming the 90 days trading horizon Guardian Directed Premium is expected to generate 0.71 times more return on investment than BMO Covered. However, Guardian Directed Premium is 1.42 times less risky than BMO Covered. It trades about -0.14 of its potential returns per unit of risk. BMO Covered Call is currently generating about -0.26 per unit of risk. If you would invest  2,152  in Guardian Directed Premium on October 7, 2024 and sell it today you would lose (25.00) from holding Guardian Directed Premium or give up 1.16% of portfolio value over 90 days.

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

Guardian Directed Premium  vs.  BMO Covered Call

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.

BMO Covered Call

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Covered Call has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO Covered 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 BMO Covered

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

The idea behind Guardian Directed Premium and BMO Covered Call 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.