Correlation Between Defensive Market and Guidestone Funds

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

By analyzing existing cross correlation between Defensive Market Strategies and Guidestone Funds , you can compare the effects of market volatilities on Defensive Market and Guidestone Funds 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 Defensive Market with a short position of Guidestone Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Guidestone Funds.

Diversification Opportunities for Defensive Market and Guidestone Funds

-0.37

Correlation Coefficient

Defensive Market  Guidestone Funds

Very good diversification

The 3 months correlation between Defensive and Guidestone is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Guidestone Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Funds and Defensive Market 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 Defensive Market Strategies are associated (or correlated) with Guidestone Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Funds has no effect on the direction of Defensive Market i.e., Defensive Market and Guidestone Funds go up and down completely randomly.

Pair Corralation between Defensive Market and Guidestone Funds

Assuming the 90 days horizon Defensive Market Strategies is expected to under-perform the Guidestone Funds. In addition to that, Defensive Market is 1.9 times more volatile than Guidestone Funds . It trades about -0.07 of its total potential returns per unit of risk. Guidestone Funds is currently generating about 0.1 per unit of volatility. If you would invest  946.00  in Guidestone Funds on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Guidestone Funds or generate 1.9% return on investment over 90 days.

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

Defensive Market Strategies  vs.  Guidestone Funds

Defensive Market Str

Risk-Adjusted Performance

Very Weak

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

Guidestone Funds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guidestone Funds are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guidestone Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Defensive Market and Guidestone Funds

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

The idea behind Defensive Market Strategies and Guidestone Funds 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.