Correlation Between California Municipal and Guggenheim World
Can any of the company-specific risk be diversified away by investing in both California Municipal and Guggenheim World 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 California Municipal and Guggenheim World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Municipal Portfolio and Guggenheim World Equity, you can compare the effects of market volatilities on California Municipal and Guggenheim World 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 California Municipal with a short position of Guggenheim World. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Guggenheim World.
Diversification Opportunities for California Municipal and Guggenheim World
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Guggenheim is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Guggenheim World Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim World Equity and California Municipal 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 California Municipal Portfolio are associated (or correlated) with Guggenheim World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim World Equity has no effect on the direction of California Municipal i.e., California Municipal and Guggenheim World go up and down completely randomly.
Pair Corralation between California Municipal and Guggenheim World
Assuming the 90 days horizon California Municipal is expected to generate 1515.0 times less return on investment than Guggenheim World. But when comparing it to its historical volatility, California Municipal Portfolio is 4.18 times less risky than Guggenheim World. It trades about 0.0 of its potential returns per unit of risk. Guggenheim World Equity is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,599 in Guggenheim World Equity on November 1, 2024 and sell it today you would earn a total of 46.00 from holding Guggenheim World Equity or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Municipal Portfolio vs. Guggenheim World Equity
Performance |
| Timeline |
| California Municipal |
| Guggenheim World Equity |
California Municipal and Guggenheim World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and Guggenheim World
The main advantage of trading using opposite California Municipal and Guggenheim World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, Guggenheim World 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 World will offset losses from the drop in Guggenheim World's long position.| California Municipal vs. First Trust Specialty | California Municipal vs. Financial Industries Fund | California Municipal vs. Putnam Global Financials | California Municipal vs. Davis Financial Fund |
| Guggenheim World vs. Doubleline Total Return | Guggenheim World vs. Ab Global Bond | Guggenheim World vs. California Municipal Portfolio | Guggenheim World vs. Nuveen Missouri Municipal |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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