Correlation Between Guggenheim Directional and Western Asset
Can any of the company-specific risk be diversified away by investing in both Guggenheim Directional and Western Asset 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 Directional and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guggenheim Directional Allocation and Western Asset Inflation, you can compare the effects of market volatilities on Guggenheim Directional and Western Asset 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 Directional with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Directional and Western Asset.
Diversification Opportunities for Guggenheim Directional and Western Asset
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Guggenheim and Western is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Directional Allocat and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation and Guggenheim Directional 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 Directional Allocation are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of Guggenheim Directional i.e., Guggenheim Directional and Western Asset go up and down completely randomly.
Pair Corralation between Guggenheim Directional and Western Asset
Assuming the 90 days horizon Guggenheim Directional Allocation is expected to generate 1.57 times more return on investment than Western Asset. However, Guggenheim Directional is 1.57 times more volatile than Western Asset Inflation. It trades about 0.11 of its potential returns per unit of risk. Western Asset Inflation is currently generating about 0.02 per unit of risk. If you would invest 1,279 in Guggenheim Directional Allocation on September 3, 2024 and sell it today you would earn a total of 498.00 from holding Guggenheim Directional Allocation or generate 38.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guggenheim Directional Allocat vs. Western Asset Inflation
Performance |
| Timeline |
| Guggenheim Directional |
| Western Asset Inflation |
Guggenheim Directional and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guggenheim Directional and Western Asset
The main advantage of trading using opposite Guggenheim Directional and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Directional position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind Guggenheim Directional Allocation and Western Asset Inflation 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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