Correlation Between World Energy and Guidepath(r) Managed

Can any of the company-specific risk be diversified away by investing in both World Energy and Guidepath(r) Managed 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 World Energy and Guidepath(r) Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between World Energy Fund and Guidepath Managed Futures, you can compare the effects of market volatilities on World Energy and Guidepath(r) Managed 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 World Energy with a short position of Guidepath(r) Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Guidepath(r) Managed.

Diversification Opportunities for World Energy and Guidepath(r) Managed

-0.26

Correlation Coefficient

World Energy  Guidepath(r) Managed

Very good diversification

The 3 months correlation between World and Guidepath(r) is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Guidepath Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Managed Futures and World Energy 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 World Energy Fund are associated (or correlated) with Guidepath(r) Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Managed Futures has no effect on the direction of World Energy i.e., World Energy and Guidepath(r) Managed go up and down completely randomly.

Pair Corralation between World Energy and Guidepath(r) Managed

Assuming the 90 days horizon World Energy Fund is expected to generate 1.57 times more return on investment than Guidepath(r) Managed. However, World Energy is 1.57 times more volatile than Guidepath Managed Futures. It trades about 0.07 of its potential returns per unit of risk. Guidepath Managed Futures is currently generating about -0.02 per unit of risk. If you would invest  1,229  in World Energy Fund on October 2, 2024 and sell it today you would earn a total of  220.00  from holding World Energy Fund or generate 17.9% return on investment over 90 days.

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

World Energy Fund  vs.  Guidepath Managed Futures

World Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, World Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidepath Managed Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidepath Managed Futures has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Guidepath(r) Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Energy and Guidepath(r) Managed

The main advantage of trading using opposite World Energy and Guidepath(r) Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Guidepath(r) Managed 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 Guidepath(r) Managed will offset losses from the drop in Guidepath(r) Managed's long position.

The idea behind World Energy Fund and Guidepath Managed Futures 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.