Correlation Between Smead Value and Guidemark Large

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

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

Diversification Opportunities for Smead Value and Guidemark Large

0.48

Correlation Coefficient

Smead Value  Guidemark Large

Very weak diversification

The 3 months correlation between Smead and Guidemark is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value 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 Smead 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 Smead Value 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 Smead Value i.e., Smead Value and Guidemark Large go up and down completely randomly.

Pair Corralation between Smead Value and Guidemark Large

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Guidemark Large. In addition to that, Smead Value is 1.61 times more volatile than Guidemark Large Cap. It trades about -0.39 of its total potential returns per unit of risk. Guidemark Large Cap is currently generating about 0.05 per unit of volatility. If you would invest  1,157  in Guidemark Large Cap on September 28, 2024 and sell it today you would earn a total of  7.00  from holding Guidemark Large Cap or generate 0.61% return on investment over 90 days.

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

Smead Value Fund  vs.  Guidemark Large Cap

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Guidemark Large Cap

Risk-Adjusted Performance

0 of 100

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 Smead Value and Guidemark Large

The main advantage of trading using opposite Smead Value and Guidemark Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value 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 Smead Value 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.