Correlation Between Guardian Investment and TD Index

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

By analyzing existing cross correlation between Guardian Investment Grade and TD Index Fund, you can compare the effects of market volatilities on Guardian Investment and TD Index 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 Investment with a short position of TD Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian Investment and TD Index.

Diversification Opportunities for Guardian Investment and TD Index

0.73

Correlation Coefficient

Guardian Investment  TD Index

Poor diversification

The 3 months correlation between Guardian and 0P000071W8 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Investment Grade and TD Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Index Fund and Guardian Investment 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 Investment Grade are associated (or correlated) with TD Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Index Fund has no effect on the direction of Guardian Investment i.e., Guardian Investment and TD Index go up and down completely randomly.

Pair Corralation between Guardian Investment and TD Index

Assuming the 90 days trading horizon Guardian Investment is expected to generate 7.31 times less return on investment than TD Index. But when comparing it to its historical volatility, Guardian Investment Grade is 2.86 times less risky than TD Index. It trades about 0.06 of its potential returns per unit of risk. TD Index Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,240  in TD Index Fund on October 26, 2024 and sell it today you would earn a total of  1,158  from holding TD Index Fund or generate 8.13% return on investment over 90 days.

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

Guardian Investment Grade  vs.  TD Index Fund

Guardian Investment Grade

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Investment Grade are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Guardian Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD Index Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, TD Index may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guardian Investment and TD Index

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

The idea behind Guardian Investment Grade and TD Index Fund 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.