Correlation Between Guidestone Value and Aggressive Allocation

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

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

Diversification Opportunities for Guidestone Value and Aggressive Allocation

0.78

Correlation Coefficient

Guidestone Value  Aggressive Allocation

Poor diversification

The 3 months correlation between Guidestone and Aggressive is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guidestone Value Equity and Aggressive Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Allocation and Guidestone Value 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 Guidestone Value Equity are associated (or correlated) with Aggressive Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Allocation has no effect on the direction of Guidestone Value i.e., Guidestone Value and Aggressive Allocation go up and down completely randomly.

Pair Corralation between Guidestone Value and Aggressive Allocation

Assuming the 90 days horizon Guidestone Value Equity is expected to under-perform the Aggressive Allocation. In addition to that, Guidestone Value is 1.31 times more volatile than Aggressive Allocation Fund. It trades about -0.12 of its total potential returns per unit of risk. Aggressive Allocation Fund is currently generating about -0.08 per unit of volatility. If you would invest  1,364  in Aggressive Allocation Fund on December 5, 2024 and sell it today you would lose (52.00) from holding Aggressive Allocation Fund or give up 3.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Guidestone Value Equity  vs.  Aggressive Allocation Fund

Guidestone Value Equity

Risk-Adjusted Performance

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 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.

Aggressive Allocation

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guidestone Value and Aggressive Allocation

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

The idea behind Guidestone Value Equity and Aggressive Allocation Fund 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.