Correlation Between Guggenheim High and Davis Financial
Can any of the company-specific risk be diversified away by investing in both Guggenheim High and Davis Financial 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 Davis Financial 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 Davis Financial Fund, you can compare the effects of market volatilities on Guggenheim High and Davis Financial 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 Davis Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim High and Davis Financial.
Diversification Opportunities for Guggenheim High and Davis Financial
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guggenheim and Davis is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim High Yield and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Financial 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 Davis Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Financial has no effect on the direction of Guggenheim High i.e., Guggenheim High and Davis Financial go up and down completely randomly.
Pair Corralation between Guggenheim High and Davis Financial
Assuming the 90 days horizon Guggenheim High is expected to generate 2.58 times less return on investment than Davis Financial. But when comparing it to its historical volatility, Guggenheim High Yield is 4.23 times less risky than Davis Financial. It trades about 0.13 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,589 in Davis Financial Fund on September 12, 2024 and sell it today you would earn a total of 2,292 from holding Davis Financial Fund or generate 49.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guggenheim High Yield vs. Davis Financial Fund
Performance |
| Timeline |
| Guggenheim High Yield |
| Davis Financial |
Guggenheim High and Davis Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guggenheim High and Davis Financial
The main advantage of trading using opposite Guggenheim High and Davis Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim High position performs unexpectedly, Davis Financial 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 Davis Financial will offset losses from the drop in Davis Financial's long position.The idea behind Guggenheim High Yield and Davis Financial Fund 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 Positions Ratings module to 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.
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