Correlation Between Vanguard and Guardian
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard and Guardian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Guardian i3 Quality, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Guardian.
Diversification Opportunities for Vanguard and Guardian
Almost no diversification
The 3 months correlation between Vanguard and Guardian is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Guardian i3 Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Quality and Vanguard 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 Vanguard SP 500 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 Quality has no effect on the direction of Vanguard i.e., Vanguard and Guardian go up and down completely randomly.
Pair Corralation between Vanguard and Guardian
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.82 times more return on investment than Guardian. However, Vanguard SP 500 is 1.22 times less risky than Guardian. It trades about 0.35 of its potential returns per unit of risk. Guardian i3 Quality is currently generating about 0.18 per unit of risk. If you would invest 14,091 in Vanguard SP 500 on September 1, 2024 and sell it today you would earn a total of 945.00 from holding Vanguard SP 500 or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard SP 500 vs. Guardian i3 Quality
Performance |
| Timeline |
| Vanguard SP 500 |
| Guardian i3 Quality |
Vanguard and Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Guardian
The main advantage of trading using opposite Vanguard and Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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.| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| Guardian vs. Guardian Directed Equity | Guardian vs. Guardian Canadian Focused | Guardian vs. Guardian Canadian Sector | Guardian vs. Guardian Ultra Short Canadian |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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