Correlation Between Wealthsimple Developed and Guardian International

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

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

Diversification Opportunities for Wealthsimple Developed and Guardian International

0.91

Correlation Coefficient

Wealthsimple Developed  Guardian International

Almost no diversification

The 3 months correlation between Wealthsimple and Guardian is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple Developed Markets and Guardian International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian International and Wealthsimple Developed 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 Wealthsimple Developed Markets are associated (or correlated) with Guardian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian International has no effect on the direction of Wealthsimple Developed i.e., Wealthsimple Developed and Guardian International go up and down completely randomly.

Pair Corralation between Wealthsimple Developed and Guardian International

Assuming the 90 days trading horizon Wealthsimple Developed is expected to generate 2.06 times less return on investment than Guardian International. But when comparing it to its historical volatility, Wealthsimple Developed Markets is 1.4 times less risky than Guardian International. It trades about 0.15 of its potential returns per unit of risk. Guardian International Equity is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,202  in Guardian International Equity on December 5, 2024 and sell it today you would earn a total of  277.00  from holding Guardian International Equity or generate 12.58% return on investment over 90 days.

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

Wealthsimple Developed Markets  vs.  Guardian International Equity

Wealthsimple Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Developed Markets are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wealthsimple Developed is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Guardian International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian International Equity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wealthsimple Developed and Guardian International

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

The idea behind Wealthsimple Developed Markets and Guardian International 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.

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.