Correlation Between Tax-managed and Guidepath(r) Flexible

Can any of the company-specific risk be diversified away by investing in both Tax-managed and Guidepath(r) Flexible 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 Tax-managed and Guidepath(r) Flexible into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tax Managed Large Cap and Guidepath Flexible Income, you can compare the effects of market volatilities on Tax-managed and Guidepath(r) Flexible 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 Tax-managed with a short position of Guidepath(r) Flexible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Guidepath(r) Flexible.

Diversification Opportunities for Tax-managed and Guidepath(r) Flexible

0.71

Correlation Coefficient

Tax-managed  Guidepath(r) Flexible

Poor diversification

The 3 months correlation between Tax-managed and Guidepath(r) is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and Guidepath Flexible Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Flexible Income and Tax-managed 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 Tax Managed Large Cap are associated (or correlated) with Guidepath(r) Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Flexible Income has no effect on the direction of Tax-managed i.e., Tax-managed and Guidepath(r) Flexible go up and down completely randomly.

Pair Corralation between Tax-managed and Guidepath(r) Flexible

Assuming the 90 days horizon Tax Managed Large Cap is expected to generate 7.26 times more return on investment than Guidepath(r) Flexible. However, Tax-managed is 7.26 times more volatile than Guidepath Flexible Income. It trades about 0.37 of its potential returns per unit of risk. Guidepath Flexible Income is currently generating about 0.28 per unit of risk. If you would invest  6,723  in Tax Managed Large Cap on April 21, 2025 and sell it today you would earn a total of  1,433  from holding Tax Managed Large Cap or generate 21.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tax Managed Large Cap  vs.  Guidepath Flexible Income

Tax Managed Large

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large Cap are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Tax-managed showed solid returns over the last few months and may actually be approaching a breakup point.

Guidepath Flexible Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guidepath Flexible Income are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Guidepath(r) Flexible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax-managed and Guidepath(r) Flexible

The main advantage of trading using opposite Tax-managed and Guidepath(r) Flexible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed position performs unexpectedly, Guidepath(r) Flexible 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) Flexible will offset losses from the drop in Guidepath(r) Flexible's long position.

The idea behind Tax Managed Large Cap and Guidepath Flexible Income 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.