Correlation Between Guidestone Value and Small Cap
Can any of the company-specific risk be diversified away by investing in both Guidestone Value and Small Cap 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 Guidestone Value and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guidestone Value Equity and Small Cap Equity, you can compare the effects of market volatilities on Guidestone Value and Small Cap 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 Guidestone Value with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidestone Value and Small Cap.
Diversification Opportunities for Guidestone Value and Small Cap
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guidestone and Small is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guidestone Value Equity and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Guidestone Value 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 Guidestone Value Equity are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Guidestone Value i.e., Guidestone Value and Small Cap go up and down completely randomly.
Pair Corralation between Guidestone Value and Small Cap
Assuming the 90 days horizon Guidestone Value is expected to generate 1.08 times less return on investment than Small Cap. But when comparing it to its historical volatility, Guidestone Value Equity is 1.75 times less risky than Small Cap. It trades about 0.14 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,650 in Small Cap Equity on August 28, 2024 and sell it today you would earn a total of 363.00 from holding Small Cap Equity or generate 22.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Guidestone Value Equity vs. Small Cap Equity
Performance |
| Timeline |
| Guidestone Value Equity |
| Small Cap Equity |
Guidestone Value and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guidestone Value and Small Cap
The main advantage of trading using opposite Guidestone Value and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidestone Value position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Guidestone Value vs. Growth Allocation Fund | Guidestone Value vs. Defensive Market Strategies | Guidestone Value vs. Defensive Market Strategies | Guidestone Value vs. Value Equity Institutional |
| Small Cap vs. Franklin Government Money | Small Cap vs. Blackrock Funds Iii | Small Cap vs. Transamerica Funds | Small Cap vs. Massmutual Premier Funds |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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