Correlation Between TD Q and Guardian Canadian

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

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

Diversification Opportunities for TD Q and Guardian Canadian

0.78

Correlation Coefficient

TD Q  Guardian Canadian

Poor diversification

The 3 months correlation between TQCD and Guardian is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding TD Q Canadian 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 TD Q 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 TD Q Canadian 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 TD Q i.e., TD Q and Guardian Canadian go up and down completely randomly.

Pair Corralation between TD Q and Guardian Canadian

Assuming the 90 days trading horizon TD Q is expected to generate 1.69 times less return on investment than Guardian Canadian. In addition to that, TD Q is 1.04 times more volatile than Guardian Canadian Sector. It trades about 0.03 of its total potential returns per unit of risk. Guardian Canadian Sector is currently generating about 0.06 per unit of volatility. If you would invest  2,630  in Guardian Canadian Sector on October 25, 2024 and sell it today you would earn a total of  55.00  from holding Guardian Canadian Sector or generate 2.09% return on investment over 90 days.

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

TD Q Canadian  vs.  Guardian Canadian Sector

TD Q Canadian

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TD Q Canadian are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TD Q is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Guardian Canadian Sector

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Canadian Sector are ranked lower than 4 (%) 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 TD Q and Guardian Canadian

The main advantage of trading using opposite TD Q and Guardian Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Q 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 TD Q Canadian 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.