Correlation Between Catalyst/millburn and Guggenheim Market

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

By analyzing existing cross correlation between Catalystmillburn Hedge Strategy and Guggenheim Market Neutral, you can compare the effects of market volatilities on Catalyst/millburn 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 Catalyst/millburn with a short position of Guggenheim Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst/millburn and Guggenheim Market.

Diversification Opportunities for Catalyst/millburn and Guggenheim Market

-0.26

Correlation Coefficient

Catalyst/millburn  Guggenheim Market

Very good diversification

The 3 months correlation between Catalyst/millburn and Guggenheim is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Catalystmillburn Hedge Strateg 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 Catalyst/millburn 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 Catalystmillburn Hedge Strategy 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 Catalyst/millburn i.e., Catalyst/millburn and Guggenheim Market go up and down completely randomly.

Pair Corralation between Catalyst/millburn and Guggenheim Market

Assuming the 90 days horizon Catalystmillburn Hedge Strategy is expected to generate 0.26 times more return on investment than Guggenheim Market. However, Catalystmillburn Hedge Strategy is 3.83 times less risky than Guggenheim Market. It trades about 0.11 of its potential returns per unit of risk. Guggenheim Market Neutral is currently generating about -0.13 per unit of risk. If you would invest  3,833  in Catalystmillburn Hedge Strategy on October 25, 2024 and sell it today you would earn a total of  138.00  from holding Catalystmillburn Hedge Strategy or generate 3.6% return on investment over 90 days.

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

Catalystmillburn Hedge Strateg  vs.  Guggenheim Market Neutral

Catalystmillburn Hedge

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Catalyst/millburn 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

0 of 100

Very Weak

Over the last 90 days Guggenheim Market Neutral 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 basic 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.

Pair Trading with Catalyst/millburn and Guggenheim Market

The main advantage of trading using opposite Catalyst/millburn and Guggenheim Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst/millburn 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 Catalystmillburn Hedge Strategy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.