Correlation Between Guggenheim Mid and Guggenheim Alpha

Can any of the company-specific risk be diversified away by investing in both Guggenheim Mid 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 Mid 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 Mid Cap and Guggenheim Alpha Opportunity, you can compare the effects of market volatilities on Guggenheim Mid 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 Mid with a short position of Guggenheim Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Mid and Guggenheim Alpha.

Diversification Opportunities for Guggenheim Mid and Guggenheim Alpha

0.78

Correlation Coefficient

Guggenheim Mid  Guggenheim Alpha

Poor diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Mid Cap 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 Mid 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 Mid Cap 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 Mid i.e., Guggenheim Mid and Guggenheim Alpha go up and down completely randomly.

Pair Corralation between Guggenheim Mid and Guggenheim Alpha

Assuming the 90 days horizon Guggenheim Mid Cap is expected to generate 1.53 times more return on investment than Guggenheim Alpha. However, Guggenheim Mid is 1.53 times more volatile than Guggenheim Alpha Opportunity. It trades about 0.15 of its potential returns per unit of risk. Guggenheim Alpha Opportunity is currently generating about 0.03 per unit of risk. If you would invest  2,392  in Guggenheim Mid Cap on September 4, 2024 and sell it today you would earn a total of  211.00  from holding Guggenheim Mid Cap or generate 8.82% return on investment over 90 days.

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

Guggenheim Mid Cap  vs.  Guggenheim Alpha Opportunity

Guggenheim Mid Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Mid Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Guggenheim Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guggenheim Alpha Opp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Alpha Opportunity are ranked lower than 2 (%) 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 Mid and Guggenheim Alpha

The main advantage of trading using opposite Guggenheim Mid and Guggenheim Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Mid 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 Mid Cap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.