Correlation Between Guggenheim Alpha and Guggenheim Limited
Can any of the company-specific risk be diversified away by investing in both Guggenheim Alpha and Guggenheim Limited 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 Alpha and Guggenheim Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guggenheim Alpha Opportunity and Guggenheim Limited Duration, you can compare the effects of market volatilities on Guggenheim Alpha and Guggenheim Limited 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 Alpha with a short position of Guggenheim Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Alpha and Guggenheim Limited.
Diversification Opportunities for Guggenheim Alpha and Guggenheim Limited
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Guggenheim and Guggenheim is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Alpha Opportunity and Guggenheim Limited Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Limited and Guggenheim Alpha 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 Alpha Opportunity are associated (or correlated) with Guggenheim Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Limited has no effect on the direction of Guggenheim Alpha i.e., Guggenheim Alpha and Guggenheim Limited go up and down completely randomly.
Pair Corralation between Guggenheim Alpha and Guggenheim Limited
Assuming the 90 days horizon Guggenheim Alpha Opportunity is expected to generate 11.25 times more return on investment than Guggenheim Limited. However, Guggenheim Alpha is 11.25 times more volatile than Guggenheim Limited Duration. It trades about 0.06 of its potential returns per unit of risk. Guggenheim Limited Duration is currently generating about 0.12 per unit of risk. If you would invest 1,851 in Guggenheim Alpha Opportunity on November 1, 2024 and sell it today you would earn a total of 22.00 from holding Guggenheim Alpha Opportunity or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guggenheim Alpha Opportunity vs. Guggenheim Limited Duration
Performance |
| Timeline |
| Guggenheim Alpha Opp |
| Guggenheim Limited |
Guggenheim Alpha and Guggenheim Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guggenheim Alpha and Guggenheim Limited
The main advantage of trading using opposite Guggenheim Alpha and Guggenheim Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Alpha position performs unexpectedly, Guggenheim Limited 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 Limited will offset losses from the drop in Guggenheim Limited's long position.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Guggenheim Alpha as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Guggenheim Alpha's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Guggenheim Alpha's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Guggenheim Alpha Opportunity.
| Guggenheim Limited vs. Guggenheim Total Return | Guggenheim Limited vs. Guggenheim Floating Rate | Guggenheim Limited vs. Guggenheim Limited Duration | Guggenheim Limited vs. Guggenheim Limited Duration |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |