Correlation Between New World and Guidemark Large

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

By analyzing existing cross correlation between New World Fund and Guidemark Large Cap, you can compare the effects of market volatilities on New World and Guidemark Large 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 New World with a short position of Guidemark Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Guidemark Large.

Diversification Opportunities for New World and Guidemark Large

0.67

Correlation Coefficient

New World  Guidemark Large

Poor diversification

The 3 months correlation between NEW and Guidemark is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Guidemark Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Large Cap and New World 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 New World Fund are associated (or correlated) with Guidemark Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Large Cap has no effect on the direction of New World i.e., New World and Guidemark Large go up and down completely randomly.

Pair Corralation between New World and Guidemark Large

Assuming the 90 days horizon New World Fund is expected to under-perform the Guidemark Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, New World Fund is 1.33 times less risky than Guidemark Large. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Guidemark Large Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,122  in Guidemark Large Cap on December 4, 2024 and sell it today you would earn a total of  8.00  from holding Guidemark Large Cap or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

New World Fund  vs.  Guidemark Large Cap

New World Fund

Risk-Adjusted Performance

Very Weak

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

Guidemark Large Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with New World and Guidemark Large

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

The idea behind New World Fund and Guidemark Large 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.