Correlation Between Microsoft and Guardian Canadian

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

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

Diversification Opportunities for Microsoft and Guardian Canadian

0.43

Correlation Coefficient

Microsoft  Guardian Canadian

Very weak diversification

The 3 months correlation between Microsoft and Guardian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Guardian Canadian Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Canadian Focused and Microsoft 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 Microsoft are associated (or correlated) with Guardian Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Canadian Focused has no effect on the direction of Microsoft i.e., Microsoft and Guardian Canadian go up and down completely randomly.

Pair Corralation between Microsoft and Guardian Canadian

Given the investment horizon of 90 days Microsoft is expected to under-perform the Guardian Canadian. In addition to that, Microsoft is 1.9 times more volatile than Guardian Canadian Focused. It trades about -0.11 of its total potential returns per unit of risk. Guardian Canadian Focused is currently generating about 0.02 per unit of volatility. If you would invest  2,940  in Guardian Canadian Focused on December 30, 2024 and sell it today you would earn a total of  17.00  from holding Guardian Canadian Focused or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  Guardian Canadian Focused

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Guardian Canadian Focused

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Canadian Focused are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Guardian Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Guardian Canadian

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

The idea behind Microsoft and Guardian Canadian Focused 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.