Correlation Between Global Stock and Guidepath Growth

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

By analyzing existing cross correlation between Global Stock Fund and Guidepath Growth Allocation, you can compare the effects of market volatilities on Global Stock and Guidepath Growth 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 Global Stock with a short position of Guidepath Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Stock and Guidepath Growth.

Diversification Opportunities for Global Stock and Guidepath Growth

0.89

Correlation Coefficient

Global Stock  Guidepath Growth

Very poor diversification

The 3 months correlation between Global and Guidepath is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Global Stock Fund and Guidepath Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Growth All and Global Stock 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 Global Stock Fund are associated (or correlated) with Guidepath Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Growth All has no effect on the direction of Global Stock i.e., Global Stock and Guidepath Growth go up and down completely randomly.

Pair Corralation between Global Stock and Guidepath Growth

Assuming the 90 days horizon Global Stock Fund is expected to generate 0.77 times more return on investment than Guidepath Growth. However, Global Stock Fund is 1.3 times less risky than Guidepath Growth. It trades about -0.09 of its potential returns per unit of risk. Guidepath Growth Allocation is currently generating about -0.11 per unit of risk. If you would invest  2,116  in Global Stock Fund on December 24, 2024 and sell it today you would lose (97.00) from holding Global Stock Fund or give up 4.58% of portfolio value over 90 days.

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

Global Stock Fund  vs.  Guidepath Growth Allocation

Global Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Global Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidepath Growth All

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidepath Growth Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Global Stock and Guidepath Growth

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

The idea behind Global Stock Fund and Guidepath Growth Allocation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.