Correlation Between Guidemark(r) World and Guidemark(r) Core

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

By analyzing existing cross correlation between Guidemark World Ex Us and Guidemark E Fixed, you can compare the effects of market volatilities on Guidemark(r) World and Guidemark(r) Core 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) World with a short position of Guidemark(r) Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark(r) World and Guidemark(r) Core.

Diversification Opportunities for Guidemark(r) World and Guidemark(r) Core

0.75

Correlation Coefficient

Guidemark(r) World  Guidemark(r) Core

Poor diversification

The 3 months correlation between Guidemark(r) and Guidemark(r) is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark World Ex Us and Guidemark E Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark E Fixed and Guidemark(r) World 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 World Ex Us are associated (or correlated) with Guidemark(r) Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark E Fixed has no effect on the direction of Guidemark(r) World i.e., Guidemark(r) World and Guidemark(r) Core go up and down completely randomly.

Pair Corralation between Guidemark(r) World and Guidemark(r) Core

Assuming the 90 days horizon Guidemark World Ex Us is expected to generate 2.96 times more return on investment than Guidemark(r) Core. However, Guidemark(r) World is 2.96 times more volatile than Guidemark E Fixed. It trades about 0.17 of its potential returns per unit of risk. Guidemark E Fixed is currently generating about 0.05 per unit of risk. If you would invest  1,041  in Guidemark World Ex Us on December 29, 2024 and sell it today you would earn a total of  90.00  from holding Guidemark World Ex Us or generate 8.65% return on investment over 90 days.

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

Guidemark World Ex Us  vs.  Guidemark E Fixed

Guidemark World Ex

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark World Ex Us are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Guidemark(r) World may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Guidemark E Fixed

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark E Fixed 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(r) Core 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) World and Guidemark(r) Core

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

The idea behind Guidemark World Ex Us and Guidemark E Fixed 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.