Correlation Between Guidemark and Guidemark World

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

By analyzing existing cross correlation between Guidemark E Fixed and Guidemark World Ex Us, you can compare the effects of market volatilities on Guidemark and Guidemark World 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 Guidemark with a short position of Guidemark World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark and Guidemark World.

Diversification Opportunities for Guidemark and Guidemark World

0.83

Correlation Coefficient

Guidemark  Guidemark World

Very poor diversification

The 3 months correlation between Guidemark and Guidemark is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark E Fixed and Guidemark World Ex Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark World Ex and Guidemark 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 Guidemark E Fixed are associated (or correlated) with Guidemark World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark World Ex has no effect on the direction of Guidemark i.e., Guidemark and Guidemark World go up and down completely randomly.

Pair Corralation between Guidemark and Guidemark World

Assuming the 90 days horizon Guidemark is expected to generate 1.87 times less return on investment than Guidemark World. But when comparing it to its historical volatility, Guidemark E Fixed is 2.74 times less risky than Guidemark World. It trades about 0.05 of its potential returns per unit of risk. Guidemark World Ex Us is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,067  in Guidemark World Ex Us on September 15, 2024 and sell it today you would earn a total of  36.00  from holding Guidemark World Ex Us or generate 3.37% return on investment over 90 days.

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

Guidemark E Fixed  vs.  Guidemark World Ex Us

Guidemark E Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guidemark World Ex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark World Ex Us has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Guidemark World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guidemark and Guidemark World

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

The idea behind Guidemark E Fixed and Guidemark World Ex Us 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.