Correlation Between Guardian and Evolve Innovation

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

By analyzing existing cross correlation between Guardian i3 Global and Evolve Innovation Index, you can compare the effects of market volatilities on Guardian and Evolve Innovation 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 with a short position of Evolve Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian and Evolve Innovation.

Diversification Opportunities for Guardian and Evolve Innovation

0.85

Correlation Coefficient

Guardian  Evolve Innovation

Very poor diversification

The 3 months correlation between Guardian and Evolve is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Guardian i3 Global and Evolve Innovation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Innovation Index and Guardian 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 i3 Global are associated (or correlated) with Evolve Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Innovation Index has no effect on the direction of Guardian i.e., Guardian and Evolve Innovation go up and down completely randomly.

Pair Corralation between Guardian and Evolve Innovation

Assuming the 90 days trading horizon Guardian i3 Global is expected to under-perform the Evolve Innovation. In addition to that, Guardian is 1.03 times more volatile than Evolve Innovation Index. It trades about -0.11 of its total potential returns per unit of risk. Evolve Innovation Index is currently generating about -0.07 per unit of volatility. If you would invest  3,947  in Evolve Innovation Index on December 29, 2024 and sell it today you would lose (220.00) from holding Evolve Innovation Index or give up 5.57% of portfolio value over 90 days.

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

Guardian i3 Global  vs.  Evolve Innovation Index

Guardian i3 Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian i3 Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Evolve Innovation Index

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guardian and Evolve Innovation

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

The idea behind Guardian i3 Global and Evolve Innovation Index 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.