Correlation Between Invesco NASDAQ and Guardian Canadian

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

By analyzing existing cross correlation between Invesco NASDAQ 100 and Guardian Canadian Sector, you can compare the effects of market volatilities on Invesco NASDAQ 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 Invesco NASDAQ with a short position of Guardian Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and Guardian Canadian.

Diversification Opportunities for Invesco NASDAQ and Guardian Canadian

0.08

Correlation Coefficient

Invesco NASDAQ  Guardian Canadian

Significant diversification

The 3 months correlation between Invesco and Guardian is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 and Guardian Canadian Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Canadian Sector and Invesco NASDAQ 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 Invesco NASDAQ 100 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 Sector has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and Guardian Canadian go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and Guardian Canadian

Assuming the 90 days trading horizon Invesco NASDAQ 100 is expected to under-perform the Guardian Canadian. In addition to that, Invesco NASDAQ is 2.86 times more volatile than Guardian Canadian Sector. It trades about -0.08 of its total potential returns per unit of risk. Guardian Canadian Sector is currently generating about 0.02 per unit of volatility. If you would invest  2,669  in Guardian Canadian Sector on December 25, 2024 and sell it today you would earn a total of  14.00  from holding Guardian Canadian Sector or generate 0.52% return on investment over 90 days.

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

Invesco NASDAQ 100  vs.  Guardian Canadian Sector

Invesco NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Guardian Canadian Sector

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Canadian Sector 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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco NASDAQ and Guardian Canadian

The main advantage of trading using opposite Invesco NASDAQ and Guardian Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco NASDAQ 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 Invesco NASDAQ 100 and Guardian Canadian Sector 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.