Correlation Between Gmo High and Guidestone Value
Can any of the company-specific risk be diversified away by investing in both Gmo High 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 Gmo High and Guidestone Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Guidestone Value Equity, you can compare the effects of market volatilities on Gmo High 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 Gmo High with a short position of Guidestone Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Guidestone Value.
Diversification Opportunities for Gmo High and Guidestone Value
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMO and Guidestone is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield 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 Gmo High 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 Gmo High Yield 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 Gmo High i.e., Gmo High and Guidestone Value go up and down completely randomly.
Pair Corralation between Gmo High and Guidestone Value
Assuming the 90 days horizon Gmo High is expected to generate 3.26 times less return on investment than Guidestone Value. But when comparing it to its historical volatility, Gmo High Yield is 3.94 times less risky than Guidestone Value. It trades about 0.21 of its potential returns per unit of risk. Guidestone Value Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,218 in Guidestone Value Equity on September 3, 2024 and sell it today you would earn a total of 93.00 from holding Guidestone Value Equity or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Guidestone Value Equity
Performance |
| Timeline |
| Gmo High Yield |
| Guidestone Value Equity |
Gmo High and Guidestone Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Guidestone Value
The main advantage of trading using opposite Gmo High and Guidestone Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High 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.| Gmo High vs. Vanguard High Yield Corporate | Gmo High vs. Vanguard High Yield Porate | Gmo High vs. Blackrock Hi Yld | Gmo High vs. Blackrock High Yield |
| Guidestone Value vs. Gmo High Yield | Guidestone Value vs. Pgim High Yield | Guidestone Value vs. Gmo High Yield | Guidestone Value vs. Pace High Yield |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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