Correlation Between Guardian International and Guardian Canadian

Can any of the company-specific risk be diversified away by investing in both Guardian International 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 International 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 International Equity and Guardian Canadian Sector, you can compare the effects of market volatilities on Guardian International 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 International with a short position of Guardian Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian International and Guardian Canadian.

Diversification Opportunities for Guardian International and Guardian Canadian

0.19

Correlation Coefficient

Guardian International  Guardian Canadian

Average diversification

The 3 months correlation between Guardian and Guardian is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Guardian International 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 International 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 International 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 International i.e., Guardian International and Guardian Canadian go up and down completely randomly.

Pair Corralation between Guardian International and Guardian Canadian

Assuming the 90 days trading horizon Guardian International Equity is expected to generate 1.59 times more return on investment than Guardian Canadian. However, Guardian International is 1.59 times more volatile than Guardian Canadian Sector. It trades about 0.22 of its potential returns per unit of risk. Guardian Canadian Sector is currently generating about -0.03 per unit of risk. If you would invest  2,202  in Guardian International Equity on December 4, 2024 and sell it today you would earn a total of  277.00  from holding Guardian International Equity or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Guardian International Equity  vs.  Guardian Canadian Sector

Guardian International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian International Equity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 International and Guardian Canadian

The main advantage of trading using opposite Guardian International and Guardian Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardian International 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 International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.