Correlation Between Global Technology and Guidemark(r) Small/mid

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

By analyzing existing cross correlation between Global Technology Portfolio and Guidemark Smallmid Cap, you can compare the effects of market volatilities on Global Technology and Guidemark(r) Small/mid 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 Global Technology with a short position of Guidemark(r) Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Technology and Guidemark(r) Small/mid.

Diversification Opportunities for Global Technology and Guidemark(r) Small/mid

0.41

Correlation Coefficient

Global Technology  Guidemark(r) Small/mid

Very weak diversification

The 3 months correlation between Global and Guidemark(r) is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio and Guidemark Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Smallmid Cap and Global Technology 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 Global Technology Portfolio are associated (or correlated) with Guidemark(r) Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Smallmid Cap has no effect on the direction of Global Technology i.e., Global Technology and Guidemark(r) Small/mid go up and down completely randomly.

Pair Corralation between Global Technology and Guidemark(r) Small/mid

Assuming the 90 days horizon Global Technology Portfolio is expected to generate 1.05 times more return on investment than Guidemark(r) Small/mid. However, Global Technology is 1.05 times more volatile than Guidemark Smallmid Cap. It trades about 0.1 of its potential returns per unit of risk. Guidemark Smallmid Cap is currently generating about 0.02 per unit of risk. If you would invest  1,237  in Global Technology Portfolio on October 24, 2024 and sell it today you would earn a total of  933.00  from holding Global Technology Portfolio or generate 75.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Global Technology Portfolio  vs.  Guidemark Smallmid Cap

Global Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Technology Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidemark Smallmid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Guidemark(r) Small/mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Technology and Guidemark(r) Small/mid

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

The idea behind Global Technology Portfolio and Guidemark Smallmid Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.