Correlation Between Emerging Markets and Guidestone Value

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

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

Diversification Opportunities for Emerging Markets and Guidestone Value

0.14

Correlation Coefficient

Emerging Markets  Guidestone Value

Average diversification

The 3 months correlation between Emerging and Guidestone is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Guidestone Value Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Value Equity and Emerging Markets 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 Emerging Markets Equity are associated (or correlated) with Guidestone Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Value Equity has no effect on the direction of Emerging Markets i.e., Emerging Markets and Guidestone Value go up and down completely randomly.

Pair Corralation between Emerging Markets and Guidestone Value

Assuming the 90 days horizon Emerging Markets is expected to generate 1.46 times less return on investment than Guidestone Value. In addition to that, Emerging Markets is 1.33 times more volatile than Guidestone Value Equity. It trades about 0.07 of its total potential returns per unit of risk. Guidestone Value Equity is currently generating about 0.14 per unit of volatility. If you would invest  1,050  in Guidestone Value Equity on September 2, 2024 and sell it today you would earn a total of  263.00  from holding Guidestone Value Equity or generate 25.05% return on investment over 90 days.

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

Emerging Markets Equity  vs.  Guidestone Value Equity

Emerging Markets Equity

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Equity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Emerging Markets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidestone Value Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guidestone Value Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Guidestone Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emerging Markets and Guidestone Value

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

The idea behind Emerging Markets Equity and Guidestone Value 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.