Correlation Between Aggressive Allocation and Guidestone Growth

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

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

Diversification Opportunities for Aggressive Allocation and Guidestone Growth

0.84

Correlation Coefficient

Aggressive Allocation  Guidestone Growth

Very poor diversification

The 3 months correlation between Aggressive and Guidestone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Allocation 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 Aggressive Allocation 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 Aggressive Allocation 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 Aggressive Allocation i.e., Aggressive Allocation and Guidestone Growth go up and down completely randomly.

Pair Corralation between Aggressive Allocation and Guidestone Growth

Assuming the 90 days horizon Aggressive Allocation is expected to generate 2.06 times less return on investment than Guidestone Growth. But when comparing it to its historical volatility, Aggressive Allocation Fund is 1.93 times less risky than Guidestone Growth. It trades about 0.12 of its potential returns per unit of risk. Guidestone Growth Equity is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,643  in Guidestone Growth Equity on September 17, 2024 and sell it today you would earn a total of  45.00  from holding Guidestone Growth Equity or generate 2.74% return on investment over 90 days.

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

Aggressive Allocation Fund  vs.  Guidestone Growth Equity

Aggressive Allocation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Allocation Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aggressive Allocation 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guidestone Growth Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Guidestone Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aggressive Allocation and Guidestone Growth

The main advantage of trading using opposite Aggressive Allocation and Guidestone Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Allocation 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 Aggressive Allocation 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 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.