Correlation Between Guardian and European Residential

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

Diversification Opportunities for Guardian and European Residential

0.02

Correlation Coefficient

Guardian  European Residential

Significant diversification

The 3 months correlation between Guardian and European is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Guardian i3 Global and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Guardian i.e., Guardian and European Residential go up and down completely randomly.

Pair Corralation between Guardian and European Residential

Assuming the 90 days trading horizon Guardian is expected to generate 1.5 times less return on investment than European Residential. But when comparing it to its historical volatility, Guardian i3 Global is 3.9 times less risky than European Residential. It trades about 0.01 of its potential returns per unit of risk. European Residential Real is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  276.00  in European Residential Real on December 10, 2024 and sell it today you would lose (29.00) from holding European Residential Real or give up 10.51% of portfolio value over 90 days.

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

Guardian i3 Global  vs.  European Residential Real

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.

European Residential Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Guardian and European Residential

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

The idea behind Guardian i3 Global and European Residential Real 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.