Correlation Between NYSE Composite and Guidestone Growth

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

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

Diversification Opportunities for NYSE Composite and Guidestone Growth

0.86

Correlation Coefficient

NYSE Composite  Guidestone Growth

Very poor diversification

The 3 months correlation between NYSE and Guidestone is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Guidestone Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Growth Equity and NYSE Composite 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 NYSE Composite are associated (or correlated) with Guidestone Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Growth Equity has no effect on the direction of NYSE Composite i.e., NYSE Composite and Guidestone Growth go up and down completely randomly.

Pair Corralation between NYSE Composite and Guidestone Growth

Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.59 times less return on investment than Guidestone Growth. But when comparing it to its historical volatility, NYSE Composite is 1.85 times less risky than Guidestone Growth. It trades about 0.07 of its potential returns per unit of risk. Guidestone Growth Equity is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,546  in Guidestone Growth Equity on September 16, 2024 and sell it today you would earn a total of  141.00  from holding Guidestone Growth Equity or generate 9.12% return on investment over 90 days.

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

NYSE Composite  vs.  Guidestone Growth Equity

Pair Trading with NYSE Composite and Guidestone Growth

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

The idea behind NYSE Composite and Guidestone Growth Equity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.