Correlation Between Guggenheim Risk and Dynamic Allocation

Can any of the company-specific risk be diversified away by investing in both Guggenheim Risk and Dynamic Allocation 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 Risk and Dynamic Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guggenheim Risk Managed and Dynamic Allocation Fund, you can compare the effects of market volatilities on Guggenheim Risk and Dynamic Allocation 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 Risk with a short position of Dynamic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Risk and Dynamic Allocation.

Diversification Opportunities for Guggenheim Risk and Dynamic Allocation

0.26

Correlation Coefficient

Guggenheim Risk  Dynamic Allocation

Modest diversification

The 3 months correlation between Guggenheim and Dynamic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Risk Managed and Dynamic Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Allocation and Guggenheim Risk 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 Risk Managed are associated (or correlated) with Dynamic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Allocation has no effect on the direction of Guggenheim Risk i.e., Guggenheim Risk and Dynamic Allocation go up and down completely randomly.

Pair Corralation between Guggenheim Risk and Dynamic Allocation

Assuming the 90 days horizon Guggenheim Risk Managed is expected to under-perform the Dynamic Allocation. In addition to that, Guggenheim Risk is 1.62 times more volatile than Dynamic Allocation Fund. It trades about -0.03 of its total potential returns per unit of risk. Dynamic Allocation Fund is currently generating about 0.14 per unit of volatility. If you would invest  1,049  in Dynamic Allocation Fund on September 12, 2024 and sell it today you would earn a total of  42.00  from holding Dynamic Allocation Fund or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Guggenheim Risk Managed  vs.  Dynamic Allocation Fund

Guggenheim Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guggenheim Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dynamic Allocation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Allocation Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dynamic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guggenheim Risk and Dynamic Allocation

The main advantage of trading using opposite Guggenheim Risk and Dynamic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Risk position performs unexpectedly, Dynamic Allocation 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 Dynamic Allocation will offset losses from the drop in Dynamic Allocation's long position.

The idea behind Guggenheim Risk Managed and Dynamic Allocation 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.