Correlation Between Guggenheim World and Guggenheim Alpha

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

By analyzing existing cross correlation between Guggenheim World Equity and Guggenheim Alpha Opportunity, you can compare the effects of market volatilities on Guggenheim World and Guggenheim Alpha 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 World with a short position of Guggenheim Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim World and Guggenheim Alpha.

Diversification Opportunities for Guggenheim World and Guggenheim Alpha

0.75

Correlation Coefficient

Guggenheim World  Guggenheim Alpha

Poor diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim World Equity and Guggenheim Alpha Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Alpha Opp and Guggenheim World 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 World Equity are associated (or correlated) with Guggenheim Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Alpha Opp has no effect on the direction of Guggenheim World i.e., Guggenheim World and Guggenheim Alpha go up and down completely randomly.

Pair Corralation between Guggenheim World and Guggenheim Alpha

Assuming the 90 days horizon Guggenheim World Equity is expected to generate 0.81 times more return on investment than Guggenheim Alpha. However, Guggenheim World Equity is 1.23 times less risky than Guggenheim Alpha. It trades about 0.15 of its potential returns per unit of risk. Guggenheim Alpha Opportunity is currently generating about 0.05 per unit of risk. If you would invest  1,706  in Guggenheim World Equity on September 5, 2024 and sell it today you would earn a total of  79.00  from holding Guggenheim World Equity or generate 4.63% return on investment over 90 days.

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

Guggenheim World Equity  vs.  Guggenheim Alpha Opportunity

Guggenheim World Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim World Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guggenheim Alpha Opp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Alpha Opportunity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim Alpha 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 World and Guggenheim Alpha

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

The idea behind Guggenheim World Equity and Guggenheim Alpha Opportunity 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.