Correlation Between Mid Cap and Guidepath(r) Tactical

Can any of the company-specific risk be diversified away by investing in both Mid Cap and Guidepath(r) Tactical 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 Mid Cap and Guidepath(r) Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Growth and Guidepath Tactical Allocation, you can compare the effects of market volatilities on Mid Cap and Guidepath(r) Tactical 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 Mid Cap with a short position of Guidepath(r) Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Guidepath(r) Tactical.

Diversification Opportunities for Mid Cap and Guidepath(r) Tactical

0.58

Correlation Coefficient

Mid Cap  Guidepath(r) Tactical

Very weak diversification

The 3 months correlation between Mid and Guidepath(r) is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Guidepath Tactical Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath(r) Tactical and Mid Cap 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 Mid Cap Growth are associated (or correlated) with Guidepath(r) Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath(r) Tactical has no effect on the direction of Mid Cap i.e., Mid Cap and Guidepath(r) Tactical go up and down completely randomly.

Pair Corralation between Mid Cap and Guidepath(r) Tactical

Assuming the 90 days horizon Mid Cap Growth is expected to generate 0.77 times more return on investment than Guidepath(r) Tactical. However, Mid Cap Growth is 1.29 times less risky than Guidepath(r) Tactical. It trades about -0.23 of its potential returns per unit of risk. Guidepath Tactical Allocation is currently generating about -0.27 per unit of risk. If you would invest  4,145  in Mid Cap Growth on October 8, 2024 and sell it today you would lose (252.00) from holding Mid Cap Growth or give up 6.08% of portfolio value over 90 days.

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

Mid Cap Growth  vs.  Guidepath Tactical Allocation

Mid Cap Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guidepath(r) Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mid Cap and Guidepath(r) Tactical

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

The idea behind Mid Cap Growth and Guidepath Tactical Allocation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.