Correlation Between Guidemark(r) Large and Alpssmith Short

Can any of the company-specific risk be diversified away by investing in both Guidemark(r) Large and Alpssmith Short 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 Guidemark(r) Large and Alpssmith Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guidemark Large Cap and Alpssmith Short Duration, you can compare the effects of market volatilities on Guidemark(r) Large and Alpssmith Short 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 Guidemark(r) Large with a short position of Alpssmith Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark(r) Large and Alpssmith Short.

Diversification Opportunities for Guidemark(r) Large and Alpssmith Short

0.45

Correlation Coefficient

Guidemark(r) Large  Alpssmith Short

Very weak diversification

The 3 months correlation between Guidemark(r) and Alpssmith is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and Alpssmith Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpssmith Short Duration and Guidemark(r) Large 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 Guidemark Large Cap are associated (or correlated) with Alpssmith Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpssmith Short Duration has no effect on the direction of Guidemark(r) Large i.e., Guidemark(r) Large and Alpssmith Short go up and down completely randomly.

Pair Corralation between Guidemark(r) Large and Alpssmith Short

Assuming the 90 days horizon Guidemark Large Cap is expected to under-perform the Alpssmith Short. In addition to that, Guidemark(r) Large is 13.68 times more volatile than Alpssmith Short Duration. It trades about -0.2 of its total potential returns per unit of risk. Alpssmith Short Duration is currently generating about -0.23 per unit of volatility. If you would invest  1,020  in Alpssmith Short Duration on October 11, 2024 and sell it today you would lose (5.00) from holding Alpssmith Short Duration or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Guidemark Large Cap  vs.  Alpssmith Short Duration

Guidemark Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Guidemark(r) Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alpssmith Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guidemark(r) Large and Alpssmith Short

The main advantage of trading using opposite Guidemark(r) Large and Alpssmith Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidemark(r) Large position performs unexpectedly, Alpssmith Short 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 Alpssmith Short will offset losses from the drop in Alpssmith Short's long position.

The idea behind Guidemark Large Cap and Alpssmith Short Duration 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.