Correlation Between Inflation-protected and Guggenheim Managed
Can any of the company-specific risk be diversified away by investing in both Inflation-protected and Guggenheim 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 Inflation-protected and Guggenheim Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Protected Bond Fund and Guggenheim Managed Futures, you can compare the effects of market volatilities on Inflation-protected and Guggenheim 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 Inflation-protected with a short position of Guggenheim Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-protected and Guggenheim Managed.
Diversification Opportunities for Inflation-protected and Guggenheim Managed
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inflation-protected and Guggenheim is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Guggenheim Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Managed and Inflation-protected 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 Inflation Protected Bond Fund are associated (or correlated) with Guggenheim Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Managed has no effect on the direction of Inflation-protected i.e., Inflation-protected and Guggenheim Managed go up and down completely randomly.
Pair Corralation between Inflation-protected and Guggenheim Managed
Assuming the 90 days horizon Inflation Protected Bond Fund is expected to under-perform the Guggenheim Managed. In addition to that, Inflation-protected is 1.08 times more volatile than Guggenheim Managed Futures. It trades about -0.27 of its total potential returns per unit of risk. Guggenheim Managed Futures is currently generating about 0.18 per unit of volatility. If you would invest 2,019 in Guggenheim Managed Futures on October 10, 2024 and sell it today you would earn a total of 43.00 from holding Guggenheim Managed Futures or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Guggenheim Managed Futures
Performance |
| Timeline |
| Inflation Protected |
| Guggenheim Managed |
Inflation-protected and Guggenheim Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation-protected and Guggenheim Managed
The main advantage of trading using opposite Inflation-protected and Guggenheim Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-protected position performs unexpectedly, Guggenheim 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 Guggenheim Managed will offset losses from the drop in Guggenheim Managed's long position.The idea behind Inflation Protected Bond Fund and Guggenheim 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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