Correlation Between Defensive Market and Guidestone Value
Can any of the company-specific risk be diversified away by investing in both Defensive Market and Guidestone Value 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 Defensive Market and Guidestone Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defensive Market Strategies and Guidestone Value Equity, you can compare the effects of market volatilities on Defensive Market and Guidestone Value 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 Defensive Market with a short position of Guidestone Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Guidestone Value.
Diversification Opportunities for Defensive Market and Guidestone Value
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Defensive and Guidestone is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Guidestone Value Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidestone Value Equity and Defensive Market 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 Defensive Market Strategies are associated (or correlated) with Guidestone Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidestone Value Equity has no effect on the direction of Defensive Market i.e., Defensive Market and Guidestone Value go up and down completely randomly.
Pair Corralation between Defensive Market and Guidestone Value
Assuming the 90 days horizon Defensive Market is expected to generate 1.95 times less return on investment than Guidestone Value. But when comparing it to its historical volatility, Defensive Market Strategies is 1.48 times less risky than Guidestone Value. It trades about 0.24 of its potential returns per unit of risk. Guidestone Value Equity is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,168 in Guidestone Value Equity on November 1, 2024 and sell it today you would earn a total of 49.00 from holding Guidestone Value Equity or generate 4.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Defensive Market Strategies vs. Guidestone Value Equity
Performance |
| Timeline |
| Defensive Market Str |
| Guidestone Value Equity |
Defensive Market and Guidestone Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defensive Market and Guidestone Value
The main advantage of trading using opposite Defensive Market and Guidestone Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defensive Market position performs unexpectedly, Guidestone Value 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 Value will offset losses from the drop in Guidestone Value's long position.| Defensive Market vs. Growth Allocation Fund | Defensive Market vs. Defensive Market Strategies | Defensive Market vs. Value Equity Institutional | Defensive Market vs. Value Equity Investor |
| Guidestone Value vs. Access Flex High | Guidestone Value vs. Siit High Yield | Guidestone Value vs. Virtus High Yield | Guidestone Value vs. Ab High Income |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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