Correlation Between Guidestone Value and Strategic Alternatives

Can any of the company-specific risk be diversified away by investing in both Guidestone Value and Strategic Alternatives 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 Strategic Alternatives 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 Strategic Alternatives Fund, you can compare the effects of market volatilities on Guidestone Value and Strategic Alternatives 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 Strategic Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidestone Value and Strategic Alternatives.

Diversification Opportunities for Guidestone Value and Strategic Alternatives

0.77

Correlation Coefficient

Guidestone Value  Strategic Alternatives

Poor diversification

The 3 months correlation between Guidestone and Strategic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Guidestone Value Equity and Strategic Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Alternatives 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 Strategic Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Alternatives has no effect on the direction of Guidestone Value i.e., Guidestone Value and Strategic Alternatives go up and down completely randomly.

Pair Corralation between Guidestone Value and Strategic Alternatives

Assuming the 90 days horizon Guidestone Value Equity is expected to generate 1.5 times more return on investment than Strategic Alternatives. However, Guidestone Value is 1.5 times more volatile than Strategic Alternatives Fund. It trades about -0.01 of its potential returns per unit of risk. Strategic Alternatives Fund is currently generating about -0.07 per unit of risk. If you would invest  1,227  in Guidestone Value Equity on September 17, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Guidestone Value Equity  vs.  Strategic Alternatives Fund

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.

Strategic Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Alternatives Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Strategic Alternatives 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 Strategic Alternatives

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

The idea behind Guidestone Value Equity and Strategic Alternatives 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.