Correlation Between Value Equity and Guidestone Value

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

By analyzing existing cross correlation between Value Equity Investor and Guidestone Value Equity, you can compare the effects of market volatilities on Value Equity and Guidestone Value 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 Value Equity with a short position of Guidestone Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Equity and Guidestone Value.

Diversification Opportunities for Value Equity and Guidestone Value

0.91

Correlation Coefficient

Value Equity  Guidestone Value

Almost no diversification

The 3 months correlation between Value and Guidestone is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Value Equity Investor and Guidestone Value Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Value Equity and Value Equity 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 Value Equity Investor are associated (or correlated) with Guidestone Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Value Equity has no effect on the direction of Value Equity i.e., Value Equity and Guidestone Value go up and down completely randomly.

Pair Corralation between Value Equity and Guidestone Value

Assuming the 90 days horizon Value Equity Investor is expected to under-perform the Guidestone Value. In addition to that, Value Equity is 1.48 times more volatile than Guidestone Value Equity. It trades about -0.05 of its total potential returns per unit of risk. Guidestone Value Equity is currently generating about -0.01 per unit of volatility. If you would invest  1,227  in Guidestone Value Equity on September 16, 2024 and sell it today you would lose (8.00) from holding Guidestone Value Equity or give up 0.65% of portfolio value over 90 days.

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

Value Equity Investor  vs.  Guidestone Value Equity

Value Equity Investor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guidestone Value Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Value Equity and Guidestone Value

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

The idea behind Value Equity Investor and Guidestone Value 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.