Correlation Between Guidemark Large and M Large

Can any of the company-specific risk be diversified away by investing in both Guidemark Large and M Large 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 M Large 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 M Large Cap, you can compare the effects of market volatilities on Guidemark Large and M Large 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 M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark Large and M Large.

Diversification Opportunities for Guidemark Large and M Large

-0.6

Correlation Coefficient

Guidemark Large  M Large

Excellent diversification

The 3 months correlation between Guidemark and MTCGX is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large 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 M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Guidemark Large i.e., Guidemark Large and M Large go up and down completely randomly.

Pair Corralation between Guidemark Large and M Large

Assuming the 90 days horizon Guidemark Large Cap is expected to under-perform the M Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Guidemark Large Cap is 1.43 times less risky than M Large. The mutual fund trades about -0.11 of its potential returns per unit of risk. The M Large Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,537  in M Large Cap on September 28, 2024 and sell it today you would earn a total of  217.00  from holding M Large Cap or generate 6.14% return on investment over 90 days.

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

Guidemark Large Cap  vs.  M Large Cap

Guidemark Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Large Cap has generated negative risk-adjusted returns adding no value to fund investors. 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.

M Large Cap

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Guidemark Large and M Large

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

The idea behind Guidemark Large Cap and M Large 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.