Correlation Between Strategic Alternatives and Guidestone Value
Can any of the company-specific risk be diversified away by investing in both Strategic Alternatives 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 Strategic Alternatives and Guidestone Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Alternatives Fund and Guidestone Value Equity, you can compare the effects of market volatilities on Strategic Alternatives 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 Strategic Alternatives with a short position of Guidestone Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Alternatives and Guidestone Value.
Diversification Opportunities for Strategic Alternatives and Guidestone Value
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between STRATEGIC and Guidestone is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Alternatives Fund 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 Strategic Alternatives 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 Strategic Alternatives Fund 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 Strategic Alternatives i.e., Strategic Alternatives and Guidestone Value go up and down completely randomly.
Pair Corralation between Strategic Alternatives and Guidestone Value
Assuming the 90 days horizon Strategic Alternatives is expected to generate 5.2 times less return on investment than Guidestone Value. But when comparing it to its historical volatility, Strategic Alternatives Fund is 2.53 times less risky than Guidestone Value. It trades about 0.04 of its potential returns per unit of risk. Guidestone Value Equity is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,056 in Guidestone Value Equity on November 9, 2024 and sell it today you would earn a total of 168.00 from holding Guidestone Value Equity or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Alternatives Fund vs. Guidestone Value Equity
Performance |
| Timeline |
| Strategic Alternatives |
| Guidestone Value Equity |
Strategic Alternatives and Guidestone Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Alternatives and Guidestone Value
The main advantage of trading using opposite Strategic Alternatives and Guidestone Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Alternatives 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.The idea behind Strategic Alternatives Fund and Guidestone Value Equity 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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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.
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