Correlation Between Global Bond and Guidestone Growth

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

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

Diversification Opportunities for Global Bond and Guidestone Growth

0.04

Correlation Coefficient

Global Bond  Guidestone Growth

Significant diversification

The 3 months correlation between Global and Guidestone is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Guidestone Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Growth Equity and Global Bond 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 Bond Fund are associated (or correlated) with Guidestone Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Growth Equity has no effect on the direction of Global Bond i.e., Global Bond and Guidestone Growth go up and down completely randomly.

Pair Corralation between Global Bond and Guidestone Growth

Assuming the 90 days horizon Global Bond Fund is expected to generate 0.19 times more return on investment than Guidestone Growth. However, Global Bond Fund is 5.17 times less risky than Guidestone Growth. It trades about 0.32 of its potential returns per unit of risk. Guidestone Growth Equity is currently generating about -0.22 per unit of risk. If you would invest  853.00  in Global Bond Fund on December 5, 2024 and sell it today you would earn a total of  14.00  from holding Global Bond Fund or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Global Bond Fund  vs.  Guidestone Growth Equity

Global Bond Fund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Bond Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Global Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Global Bond and Guidestone Growth

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

The idea behind Global Bond Fund and Guidestone Growth Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.