Correlation Between Guggenheim High and Investec Emerging

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

By analyzing existing cross correlation between Guggenheim High Yield and Investec Emerging Markets, you can compare the effects of market volatilities on Guggenheim High and Investec Emerging 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 High with a short position of Investec Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim High and Investec Emerging.

Diversification Opportunities for Guggenheim High and Investec Emerging

-0.2

Correlation Coefficient

Guggenheim High  Investec Emerging

Good diversification

The 3 months correlation between Guggenheim and Investec is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim High Yield and Investec Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Emerging Markets and Guggenheim High 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 High Yield are associated (or correlated) with Investec Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Emerging Markets has no effect on the direction of Guggenheim High i.e., Guggenheim High and Investec Emerging go up and down completely randomly.

Pair Corralation between Guggenheim High and Investec Emerging

Assuming the 90 days horizon Guggenheim High Yield is expected to under-perform the Investec Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Guggenheim High Yield is 8.09 times less risky than Investec Emerging. The mutual fund trades about -0.31 of its potential returns per unit of risk. The Investec Emerging Markets is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,078  in Investec Emerging Markets on October 1, 2024 and sell it today you would lose (8.00) from holding Investec Emerging Markets or give up 0.74% of portfolio value over 90 days.

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

Guggenheim High Yield  vs.  Investec Emerging Markets

Guggenheim High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Investec Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Investec Emerging 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 High and Investec Emerging

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

The idea behind Guggenheim High Yield and Investec Emerging Markets 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.