Correlation Between Guidestone Value and Equity Index

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

Diversification Opportunities for Guidestone Value and Equity Index

0.8

Correlation Coefficient

Guidestone Value  Equity Index

Very poor diversification

The 3 months correlation between Guidestone and Equity is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guidestone Value Equity and Equity Index Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Index Investor 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 Equity Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Index Investor has no effect on the direction of Guidestone Value i.e., Guidestone Value and Equity Index go up and down completely randomly.

Pair Corralation between Guidestone Value and Equity Index

Assuming the 90 days horizon Guidestone Value Equity is expected to under-perform the Equity Index. In addition to that, Guidestone Value is 1.16 times more volatile than Equity Index Investor. It trades about -0.01 of its total potential returns per unit of risk. Equity Index Investor is currently generating about 0.11 per unit of volatility. If you would invest  5,747  in Equity Index Investor on September 17, 2024 and sell it today you would earn a total of  304.00  from holding Equity Index Investor or generate 5.29% return on investment over 90 days.

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

Guidestone Value Equity  vs.  Equity Index Investor

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.

Equity Index Investor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Index Investor are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Equity Index 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 Equity Index

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

The idea behind Guidestone Value Equity and Equity Index Investor 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.