Correlation Between Medium-duration Bond and Guidestone Funds

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

By analyzing existing cross correlation between Medium Duration Bond Institutional and Guidestone Funds International, you can compare the effects of market volatilities on Medium-duration Bond 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 Medium-duration Bond with a short position of Guidestone Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medium-duration Bond and Guidestone Funds.

Diversification Opportunities for Medium-duration Bond and Guidestone Funds

0.91

Correlation Coefficient

Medium-duration Bond  Guidestone Funds

Almost no diversification

The 3 months correlation between Medium-duration and GuideStone is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Medium Duration Bond Instituti and Guidestone Funds International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Funds Int and Medium-duration 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 Medium Duration Bond Institutional 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 Int has no effect on the direction of Medium-duration Bond i.e., Medium-duration Bond and Guidestone Funds go up and down completely randomly.

Pair Corralation between Medium-duration Bond and Guidestone Funds

Assuming the 90 days horizon Medium-duration Bond is expected to generate 4.45 times less return on investment than Guidestone Funds. But when comparing it to its historical volatility, Medium Duration Bond Institutional is 2.92 times less risky than Guidestone Funds. It trades about 0.13 of its potential returns per unit of risk. Guidestone Funds International is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,153  in Guidestone Funds International on December 26, 2024 and sell it today you would earn a total of  119.00  from holding Guidestone Funds International or generate 10.32% return on investment over 90 days.

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

Medium Duration Bond Instituti  vs.  Guidestone Funds International

Medium Duration Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medium Duration Bond Institutional are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Medium-duration Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidestone Funds Int

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guidestone Funds International are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Guidestone Funds may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Medium-duration Bond and Guidestone Funds

The main advantage of trading using opposite Medium-duration Bond and Guidestone Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medium-duration Bond 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 Medium Duration Bond Institutional and Guidestone Funds International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.