Correlation Between Guidemark(r) Small/mid and Guidemark Large

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

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

Diversification Opportunities for Guidemark(r) Small/mid and Guidemark Large

0.01

Correlation Coefficient

Guidemark(r) Small/mid  Guidemark Large

Significant diversification

The 3 months correlation between Guidemark(r) and Guidemark is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Smallmid Cap and Guidemark Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Large Cap and Guidemark(r) Small/mid 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 Smallmid Cap are associated (or correlated) with Guidemark Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Large Cap has no effect on the direction of Guidemark(r) Small/mid i.e., Guidemark(r) Small/mid and Guidemark Large go up and down completely randomly.

Pair Corralation between Guidemark(r) Small/mid and Guidemark Large

Assuming the 90 days horizon Guidemark Smallmid Cap is expected to under-perform the Guidemark Large. In addition to that, Guidemark(r) Small/mid is 2.44 times more volatile than Guidemark Large Cap. It trades about -0.35 of its total potential returns per unit of risk. Guidemark Large Cap is currently generating about -0.23 per unit of volatility. If you would invest  1,176  in Guidemark Large Cap on October 5, 2024 and sell it today you would lose (53.00) from holding Guidemark Large Cap or give up 4.51% of portfolio value over 90 days.

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

Guidemark Smallmid Cap  vs.  Guidemark Large Cap

Guidemark Smallmid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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 Guidemark(r) Small/mid and Guidemark Large

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

The idea behind Guidemark Smallmid Cap and Guidemark Large Cap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.