Correlation Between Classic Value and Guggenheim Mid

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

By analyzing existing cross correlation between Classic Value Fund and Guggenheim Mid Cap, you can compare the effects of market volatilities on Classic Value and Guggenheim Mid 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 Classic Value with a short position of Guggenheim Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Classic Value and Guggenheim Mid.

Diversification Opportunities for Classic Value and Guggenheim Mid

0.96

Correlation Coefficient

Classic Value  Guggenheim Mid

Almost no diversification

The 3 months correlation between Classic and Guggenheim is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Classic Value Fund and Guggenheim Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Mid Cap and Classic Value 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 Classic Value Fund are associated (or correlated) with Guggenheim Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Mid Cap has no effect on the direction of Classic Value i.e., Classic Value and Guggenheim Mid go up and down completely randomly.

Pair Corralation between Classic Value and Guggenheim Mid

Assuming the 90 days horizon Classic Value Fund is expected to generate 1.16 times more return on investment than Guggenheim Mid. However, Classic Value is 1.16 times more volatile than Guggenheim Mid Cap. It trades about 0.34 of its potential returns per unit of risk. Guggenheim Mid Cap is currently generating about 0.06 per unit of risk. If you would invest  2,390  in Classic Value Fund on October 26, 2024 and sell it today you would earn a total of  129.00  from holding Classic Value Fund or generate 5.4% return on investment over 90 days.

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

Classic Value Fund  vs.  Guggenheim Mid Cap

Classic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Classic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Guggenheim Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Classic Value and Guggenheim Mid

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

The idea behind Classic Value Fund and Guggenheim Mid Cap 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.