Correlation Between Dynamic Active and Guardian

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

By analyzing existing cross correlation between Dynamic Active Global and Guardian i3 Global, you can compare the effects of market volatilities on Dynamic Active and Guardian 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 Dynamic Active with a short position of Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and Guardian.

Diversification Opportunities for Dynamic Active and Guardian

0.9

Correlation Coefficient

Dynamic Active  Guardian

Almost no diversification

The 3 months correlation between Dynamic and Guardian is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Global and Guardian i3 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Global and Dynamic Active 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 Dynamic Active Global are associated (or correlated) with Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Global has no effect on the direction of Dynamic Active i.e., Dynamic Active and Guardian go up and down completely randomly.

Pair Corralation between Dynamic Active and Guardian

Assuming the 90 days trading horizon Dynamic Active is expected to generate 1.05 times less return on investment than Guardian. In addition to that, Dynamic Active is 1.09 times more volatile than Guardian i3 Global. It trades about 0.12 of its total potential returns per unit of risk. Guardian i3 Global is currently generating about 0.14 per unit of volatility. If you would invest  2,003  in Guardian i3 Global on September 12, 2024 and sell it today you would earn a total of  1,063  from holding Guardian i3 Global or generate 53.07% return on investment over 90 days.

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

Dynamic Active Global  vs.  Guardian i3 Global

Dynamic Active Global

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Global are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Dynamic Active displayed solid returns over the last few months and may actually be approaching a breakup point.

Guardian i3 Global

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian i3 Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dynamic Active and Guardian

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

The idea behind Dynamic Active Global and Guardian i3 Global 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..