Correlation Between Equity Index and Guidestone Value

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

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

Diversification Opportunities for Equity Index and Guidestone Value

0.96

Correlation Coefficient

Equity Index  Guidestone Value

Almost no diversification

The 3 months correlation between Equity and Guidestone is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Equity Index Investor 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 Equity Index 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 Equity Index Investor 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 Equity Index i.e., Equity Index and Guidestone Value go up and down completely randomly.

Pair Corralation between Equity Index and Guidestone Value

Assuming the 90 days horizon Equity Index Investor is expected to generate 1.08 times more return on investment than Guidestone Value. However, Equity Index is 1.08 times more volatile than Guidestone Value Equity. It trades about 0.19 of its potential returns per unit of risk. Guidestone Value Equity is currently generating about 0.18 per unit of risk. If you would invest  5,637  in Equity Index Investor on September 2, 2024 and sell it today you would earn a total of  494.00  from holding Equity Index Investor or generate 8.76% return on investment over 90 days.

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

Equity Index Investor  vs.  Guidestone Value Equity

Equity Index Investor

Risk-Adjusted Performance

14 of 100

Good

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

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 Equity Index and Guidestone Value

The main advantage of trading using opposite Equity Index and Guidestone Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Index 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 Equity Index Investor 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.

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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.