Correlation Between Guggenheim World and Guggenheim Large
Can any of the company-specific risk be diversified away by investing in both Guggenheim World and Guggenheim Large 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 World and Guggenheim Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guggenheim World Equity and Guggenheim Large Cap, you can compare the effects of market volatilities on Guggenheim World and Guggenheim Large 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 World with a short position of Guggenheim Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim World and Guggenheim Large.
Diversification Opportunities for Guggenheim World and Guggenheim Large
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Guggenheim and Guggenheim is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim World Equity and Guggenheim Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Large Cap and Guggenheim World 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 World Equity are associated (or correlated) with Guggenheim Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Large Cap has no effect on the direction of Guggenheim World i.e., Guggenheim World and Guggenheim Large go up and down completely randomly.
Pair Corralation between Guggenheim World and Guggenheim Large
Assuming the 90 days horizon Guggenheim World Equity is expected to generate 0.7 times more return on investment than Guggenheim Large. However, Guggenheim World Equity is 1.43 times less risky than Guggenheim Large. It trades about 0.08 of its potential returns per unit of risk. Guggenheim Large Cap is currently generating about 0.02 per unit of risk. If you would invest 1,370 in Guggenheim World Equity on August 27, 2024 and sell it today you would earn a total of 401.00 from holding Guggenheim World Equity or generate 29.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guggenheim World Equity vs. Guggenheim Large Cap
Performance |
| Timeline |
| Guggenheim World Equity |
| Guggenheim Large Cap |
Guggenheim World and Guggenheim Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guggenheim World and Guggenheim Large
The main advantage of trading using opposite Guggenheim World and Guggenheim Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim World position performs unexpectedly, Guggenheim Large 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 Large will offset losses from the drop in Guggenheim Large's long position.The idea behind Guggenheim World Equity and Guggenheim Large 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.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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