Correlation Between Guardian and Guardian Directed

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

By analyzing existing cross correlation between Guardian i3 Quality and Guardian Directed Equity, you can compare the effects of market volatilities on Guardian and Guardian Directed 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 Guardian Directed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardian and Guardian Directed.

Diversification Opportunities for Guardian and Guardian Directed

0.11

Correlation Coefficient

Guardian  Guardian Directed

Average diversification

The 3 months correlation between Guardian and Guardian is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Guardian i3 Quality and Guardian Directed Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Directed Equity 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 Quality are associated (or correlated) with Guardian Directed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Directed Equity has no effect on the direction of Guardian i.e., Guardian and Guardian Directed go up and down completely randomly.

Pair Corralation between Guardian and Guardian Directed

Assuming the 90 days trading horizon Guardian i3 Quality is expected to under-perform the Guardian Directed. In addition to that, Guardian is 3.34 times more volatile than Guardian Directed Equity. It trades about -0.03 of its total potential returns per unit of risk. Guardian Directed Equity is currently generating about -0.04 per unit of volatility. If you would invest  2,047  in Guardian Directed Equity on December 4, 2024 and sell it today you would lose (20.00) from holding Guardian Directed Equity or give up 0.98% of portfolio value over 90 days.

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

Guardian i3 Quality  vs.  Guardian Directed Equity

Guardian i3 Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian i3 Quality 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.

Guardian Directed Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian Directed Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Guardian Directed 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 Guardian Directed

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

The idea behind Guardian i3 Quality and Guardian Directed 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.