Correlation Between Guggenheim Macro and Guggenheim Directional

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

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

Diversification Opportunities for Guggenheim Macro and Guggenheim Directional

0.73

Correlation Coefficient

Guggenheim Macro  Guggenheim Directional

Poor diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Macro Opportunities and Guggenheim Directional Allocat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Directional and Guggenheim Macro 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 Macro Opportunities are associated (or correlated) with Guggenheim Directional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Directional has no effect on the direction of Guggenheim Macro i.e., Guggenheim Macro and Guggenheim Directional go up and down completely randomly.

Pair Corralation between Guggenheim Macro and Guggenheim Directional

Assuming the 90 days horizon Guggenheim Macro is expected to generate 7.32 times less return on investment than Guggenheim Directional. But when comparing it to its historical volatility, Guggenheim Macro Opportunities is 5.09 times less risky than Guggenheim Directional. It trades about 0.13 of its potential returns per unit of risk. Guggenheim Directional Allocation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,652  in Guggenheim Directional Allocation on September 14, 2024 and sell it today you would earn a total of  126.00  from holding Guggenheim Directional Allocation or generate 7.63% return on investment over 90 days.

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

Guggenheim Macro Opportunities  vs.  Guggenheim Directional Allocat

Guggenheim Macro Opp

Risk-Adjusted Performance

10 of 100

OK

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

Guggenheim Directional

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Directional Allocation are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Guggenheim Directional may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guggenheim Macro and Guggenheim Directional

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

The idea behind Guggenheim Macro Opportunities and Guggenheim Directional Allocation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.