Correlation Between Guardian and Brompton European

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

Diversification Opportunities for Guardian and Brompton European

0.42

Correlation Coefficient

Guardian  Brompton European

Very weak diversification

The 3 months correlation between Guardian and Brompton is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Guardian i3 Global and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European 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 Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of Guardian i.e., Guardian and Brompton European go up and down completely randomly.

Pair Corralation between Guardian and Brompton European

Assuming the 90 days trading horizon Guardian i3 Global is expected to under-perform the Brompton European. In addition to that, Guardian is 1.11 times more volatile than Brompton European Dividend. It trades about -0.03 of its total potential returns per unit of risk. Brompton European Dividend is currently generating about 0.07 per unit of volatility. If you would invest  1,054  in Brompton European Dividend on December 2, 2024 and sell it today you would earn a total of  45.00  from holding Brompton European Dividend or generate 4.27% return on investment over 90 days.

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

Guardian i3 Global  vs.  Brompton European Dividend

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 very healthy basic indicators, Guardian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brompton European

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton European 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 and Brompton European

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

The idea behind Guardian i3 Global and Brompton European Dividend 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.