Correlation Between Guidemark Large and Extended Market

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

Diversification Opportunities for Guidemark Large and Extended Market

-0.19

Correlation Coefficient

Guidemark Large  Extended Market

Good diversification

The 3 months correlation between Guidemark and Extended is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Guidemark Large i.e., Guidemark Large and Extended Market go up and down completely randomly.

Pair Corralation between Guidemark Large and Extended Market

Assuming the 90 days horizon Guidemark Large Cap is expected to generate 0.34 times more return on investment than Extended Market. However, Guidemark Large Cap is 2.95 times less risky than Extended Market. It trades about -0.09 of its potential returns per unit of risk. Extended Market Index is currently generating about -0.11 per unit of risk. If you would invest  1,201  in Guidemark Large Cap on September 25, 2024 and sell it today you would lose (36.00) from holding Guidemark Large Cap or give up 3.0% of portfolio value over 90 days.

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

Guidemark Large Cap  vs.  Extended Market Index

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.

Extended Market Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Extended Market Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Guidemark Large and Extended Market

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

The idea behind Guidemark Large Cap and Extended Market Index 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.