Correlation Between Guggenheim Strategic and Pimco Small
Can any of the company-specific risk be diversified away by investing in both Guggenheim Strategic and Pimco Small 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 Guggenheim Strategic and Pimco Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guggenheim Strategic Opportunities and Pimco Small Cap, you can compare the effects of market volatilities on Guggenheim Strategic and Pimco Small 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 Guggenheim Strategic with a short position of Pimco Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Strategic and Pimco Small.
Diversification Opportunities for Guggenheim Strategic and Pimco Small
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guggenheim and Pimco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Strategic Opportuni and Pimco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Small Cap and Guggenheim Strategic 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 Guggenheim Strategic Opportunities are associated (or correlated) with Pimco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Small Cap has no effect on the direction of Guggenheim Strategic i.e., Guggenheim Strategic and Pimco Small go up and down completely randomly.
Pair Corralation between Guggenheim Strategic and Pimco Small
Considering the 90-day investment horizon Guggenheim Strategic is expected to generate 1.74 times less return on investment than Pimco Small. But when comparing it to its historical volatility, Guggenheim Strategic Opportunities is 2.93 times less risky than Pimco Small. It trades about 0.22 of its potential returns per unit of risk. Pimco Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 783.00 in Pimco Small Cap on August 29, 2024 and sell it today you would earn a total of 89.00 from holding Pimco Small Cap or generate 11.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guggenheim Strategic Opportuni vs. Pimco Small Cap
Performance |
| Timeline |
| Guggenheim Strategic |
| Pimco Small Cap |
Guggenheim Strategic and Pimco Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guggenheim Strategic and Pimco Small
The main advantage of trading using opposite Guggenheim Strategic and Pimco Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Strategic position performs unexpectedly, Pimco Small 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 Pimco Small will offset losses from the drop in Pimco Small's long position.The idea behind Guggenheim Strategic Opportunities and Pimco Small Cap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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