Correlation Between Guggenheim High and Meridian Equity
Can any of the company-specific risk be diversified away by investing in both Guggenheim High and Meridian Equity 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 High and Meridian Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guggenheim High Yield and Meridian Equity Income, you can compare the effects of market volatilities on Guggenheim High and Meridian Equity 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 High with a short position of Meridian Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim High and Meridian Equity.
Diversification Opportunities for Guggenheim High and Meridian Equity
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guggenheim and Meridian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim High Yield and Meridian Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Equity Income and Guggenheim High 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 High Yield are associated (or correlated) with Meridian Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Equity Income has no effect on the direction of Guggenheim High i.e., Guggenheim High and Meridian Equity go up and down completely randomly.
Pair Corralation between Guggenheim High and Meridian Equity
Assuming the 90 days horizon Guggenheim High Yield is expected to generate 0.25 times more return on investment than Meridian Equity. However, Guggenheim High Yield is 4.03 times less risky than Meridian Equity. It trades about 0.13 of its potential returns per unit of risk. Meridian Equity Income is currently generating about -0.02 per unit of risk. If you would invest 1,011 in Guggenheim High Yield on September 12, 2024 and sell it today you would earn a total of 3.00 from holding Guggenheim High Yield or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guggenheim High Yield vs. Meridian Equity Income
Performance |
| Timeline |
| Guggenheim High Yield |
| Meridian Equity Income |
Guggenheim High and Meridian Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guggenheim High and Meridian Equity
The main advantage of trading using opposite Guggenheim High and Meridian Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim High position performs unexpectedly, Meridian Equity 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 Meridian Equity will offset losses from the drop in Meridian Equity's long position.The idea behind Guggenheim High Yield and Meridian Equity 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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