Correlation Between Guidestone Growth and Value Equity

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

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

Diversification Opportunities for Guidestone Growth and Value Equity

0.53

Correlation Coefficient

Guidestone Growth  Value Equity

Very weak diversification

The 3 months correlation between Guidestone and Value is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Guidestone Growth Equity and Value Equity Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Equity Investor and Guidestone Growth 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 Guidestone Growth Equity are associated (or correlated) with Value Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Equity Investor has no effect on the direction of Guidestone Growth i.e., Guidestone Growth and Value Equity go up and down completely randomly.

Pair Corralation between Guidestone Growth and Value Equity

Assuming the 90 days horizon Guidestone Growth Equity is expected to under-perform the Value Equity. In addition to that, Guidestone Growth is 1.78 times more volatile than Value Equity Investor. It trades about -0.09 of its total potential returns per unit of risk. Value Equity Investor is currently generating about 0.04 per unit of volatility. If you would invest  1,873  in Value Equity Investor on December 28, 2024 and sell it today you would earn a total of  29.00  from holding Value Equity Investor or generate 1.55% return on investment over 90 days.

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

Guidestone Growth Equity  vs.  Value Equity Investor

Guidestone Growth Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidestone Growth Equity 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.

Value Equity Investor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Value Equity Investor are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Value Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guidestone Growth and Value Equity

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

The idea behind Guidestone Growth Equity and Value Equity Investor 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.