Correlation Between Guidemark Large and Parametric Intl

Can any of the company-specific risk be diversified away by investing in both Guidemark Large and Parametric Intl 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 Large and Parametric Intl 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 Parametric Intl Equity, you can compare the effects of market volatilities on Guidemark Large and Parametric Intl 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 Large with a short position of Parametric Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark Large and Parametric Intl.

Diversification Opportunities for Guidemark Large and Parametric Intl

0.57

Correlation Coefficient

Guidemark Large  Parametric Intl

Very weak diversification

The 3 months correlation between Guidemark and Parametric is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and Parametric Intl Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Intl Equity and Guidemark 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 Parametric Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Intl Equity has no effect on the direction of Guidemark Large i.e., Guidemark Large and Parametric Intl go up and down completely randomly.

Pair Corralation between Guidemark Large and Parametric Intl

Assuming the 90 days horizon Guidemark Large Cap is expected to generate 1.32 times more return on investment than Parametric Intl. However, Guidemark Large is 1.32 times more volatile than Parametric Intl Equity. It trades about 0.05 of its potential returns per unit of risk. Parametric Intl Equity is currently generating about -0.12 per unit of risk. If you would invest  1,151  in Guidemark Large Cap on September 14, 2024 and sell it today you would earn a total of  32.00  from holding Guidemark Large Cap or generate 2.78% return on investment over 90 days.

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

Guidemark Large Cap  vs.  Parametric Intl Equity

Guidemark Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guidemark Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parametric Intl Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parametric Intl Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Parametric Intl 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 Large and Parametric Intl

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

The idea behind Guidemark Large Cap and Parametric Intl 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.