Correlation Between Guardian International and TD Canadian

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

Diversification Opportunities for Guardian International and TD Canadian

-0.39

Correlation Coefficient

Guardian International  TD Canadian

Very good diversification

The 3 months correlation between Guardian and TTP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Guardian International Equity and TD Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Equity 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 TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Equity has no effect on the direction of Guardian International i.e., Guardian International and TD Canadian go up and down completely randomly.

Pair Corralation between Guardian International and TD Canadian

Assuming the 90 days trading horizon Guardian International is expected to generate 3.84 times less return on investment than TD Canadian. In addition to that, Guardian International is 1.06 times more volatile than TD Canadian Equity. It trades about 0.03 of its total potential returns per unit of risk. TD Canadian Equity is currently generating about 0.12 per unit of volatility. If you would invest  2,496  in TD Canadian Equity on October 25, 2024 and sell it today you would earn a total of  402.00  from holding TD Canadian Equity or generate 16.11% return on investment over 90 days.

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

Guardian International Equity  vs.  TD Canadian Equity

Guardian International

Risk-Adjusted Performance

0 of 100

Very Weak

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

TD Canadian Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Equity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TD 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 TD Canadian

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

The idea behind Guardian International Equity and TD Canadian Equity 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.