Correlation Between Guggenheim World and Guggenheim Market

Can any of the company-specific risk be diversified away by investing in both Guggenheim World and Guggenheim Market 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 Market 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 Market Neutral, you can compare the effects of market volatilities on Guggenheim World and Guggenheim Market 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 Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim World and Guggenheim Market.

Diversification Opportunities for Guggenheim World and Guggenheim Market

0.69

Correlation Coefficient

Guggenheim World  Guggenheim Market

Poor diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim World Equity and Guggenheim Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Market Neutral 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 Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Market Neutral has no effect on the direction of Guggenheim World i.e., Guggenheim World and Guggenheim Market go up and down completely randomly.

Pair Corralation between Guggenheim World and Guggenheim Market

Assuming the 90 days horizon Guggenheim World Equity is expected to generate 4.66 times more return on investment than Guggenheim Market. However, Guggenheim World is 4.66 times more volatile than Guggenheim Market Neutral. It trades about 0.15 of its potential returns per unit of risk. Guggenheim Market Neutral is currently generating about 0.16 per unit of risk. If you would invest  1,699  in Guggenheim World Equity on September 4, 2024 and sell it today you would earn a total of  81.00  from holding Guggenheim World Equity or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Guggenheim World Equity  vs.  Guggenheim Market Neutral

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 forward 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 Market Neutral

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Market Neutral are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim Market 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 Market

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

The idea behind Guggenheim World Equity and Guggenheim Market Neutral 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.