Correlation Between Guidepath(r) Absolute and Guidepath(r) Managed
Can any of the company-specific risk be diversified away by investing in both Guidepath(r) Absolute and Guidepath(r) Managed 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 Guidepath(r) Absolute and Guidepath(r) Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guidepath Absolute Return and Guidepath Managed Futures, you can compare the effects of market volatilities on Guidepath(r) Absolute and Guidepath(r) Managed 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 Guidepath(r) Absolute with a short position of Guidepath(r) Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidepath(r) Absolute and Guidepath(r) Managed.
Diversification Opportunities for Guidepath(r) Absolute and Guidepath(r) Managed
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guidepath(r) and Guidepath(r) is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Guidepath Absolute Return and Guidepath Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Managed Futures and Guidepath(r) Absolute 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 Guidepath Absolute Return are associated (or correlated) with Guidepath(r) Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Managed Futures has no effect on the direction of Guidepath(r) Absolute i.e., Guidepath(r) Absolute and Guidepath(r) Managed go up and down completely randomly.
Pair Corralation between Guidepath(r) Absolute and Guidepath(r) Managed
Assuming the 90 days horizon Guidepath Absolute Return is expected to generate 0.23 times more return on investment than Guidepath(r) Managed. However, Guidepath Absolute Return is 4.43 times less risky than Guidepath(r) Managed. It trades about 0.14 of its potential returns per unit of risk. Guidepath Managed Futures is currently generating about -0.05 per unit of risk. If you would invest 931.00 in Guidepath Absolute Return on August 27, 2024 and sell it today you would earn a total of 43.00 from holding Guidepath Absolute Return or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guidepath Absolute Return vs. Guidepath Managed Futures
Performance |
| Timeline |
| Guidepath Absolute Return |
| Guidepath Managed Futures |
Guidepath(r) Absolute and Guidepath(r) Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guidepath(r) Absolute and Guidepath(r) Managed
The main advantage of trading using opposite Guidepath(r) Absolute and Guidepath(r) Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidepath(r) Absolute position performs unexpectedly, Guidepath(r) Managed 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 Guidepath(r) Managed will offset losses from the drop in Guidepath(r) Managed's long position.The idea behind Guidepath Absolute Return and Guidepath Managed Futures 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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