Correlation Between Government Securities and Guidestone Funds

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

By analyzing existing cross correlation between Government Securities Fund and Guidestone Funds International, you can compare the effects of market volatilities on Government Securities and Guidestone Funds 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 Government Securities with a short position of Guidestone Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Guidestone Funds.

Diversification Opportunities for Government Securities and Guidestone Funds

0.71

Correlation Coefficient

Government Securities  Guidestone Funds

Poor diversification

The 3 months correlation between Government and Guidestone is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Guidestone Funds International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Funds Int and Government Securities 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 Government Securities Fund are associated (or correlated) with Guidestone Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Funds Int has no effect on the direction of Government Securities i.e., Government Securities and Guidestone Funds go up and down completely randomly.

Pair Corralation between Government Securities and Guidestone Funds

Assuming the 90 days horizon Government Securities Fund is expected to generate 0.3 times more return on investment than Guidestone Funds. However, Government Securities Fund is 3.35 times less risky than Guidestone Funds. It trades about -0.06 of its potential returns per unit of risk. Guidestone Funds International is currently generating about -0.07 per unit of risk. If you would invest  893.00  in Government Securities Fund on August 31, 2024 and sell it today you would lose (9.00) from holding Government Securities Fund or give up 1.01% of portfolio value over 90 days.

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

Government Securities Fund  vs.  Guidestone Funds International

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guidestone Funds Int

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Government Securities and Guidestone Funds

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

The idea behind Government Securities Fund and Guidestone Funds International 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.