Correlation Between Guidemark Large and Guidemark Smallmid

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

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

Diversification Opportunities for Guidemark Large and Guidemark Smallmid

-0.37

Correlation Coefficient

Guidemark Large  Guidemark Smallmid

Very good diversification

The 3 months correlation between Guidemark and Guidemark is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and Guidemark Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Smallmid Cap and Guidemark Large 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 Large Cap are associated (or correlated) with Guidemark Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Smallmid Cap has no effect on the direction of Guidemark Large i.e., Guidemark Large and Guidemark Smallmid go up and down completely randomly.

Pair Corralation between Guidemark Large and Guidemark Smallmid

Assuming the 90 days horizon Guidemark Large is expected to generate 3.09 times less return on investment than Guidemark Smallmid. But when comparing it to its historical volatility, Guidemark Large Cap is 1.16 times less risky than Guidemark Smallmid. It trades about 0.05 of its potential returns per unit of risk. Guidemark Smallmid Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,058  in Guidemark Smallmid Cap on September 15, 2024 and sell it today you would earn a total of  192.00  from holding Guidemark Smallmid Cap or generate 9.33% return on investment over 90 days.

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

Guidemark Large Cap  vs.  Guidemark Smallmid Cap

Guidemark Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Guidemark Smallmid Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark Smallmid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Guidemark Smallmid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guidemark Large and Guidemark Smallmid

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

The idea behind Guidemark Large Cap and Guidemark Smallmid 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.