Correlation Between Davis New and Guggenheim Risk

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

By analyzing existing cross correlation between Davis New York and Guggenheim Risk Managed, you can compare the effects of market volatilities on Davis New and Guggenheim Risk 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 Davis New with a short position of Guggenheim Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis New and Guggenheim Risk.

Diversification Opportunities for Davis New and Guggenheim Risk

0.01

Correlation Coefficient

Davis New  Guggenheim Risk

Significant diversification

The 3 months correlation between Davis and Guggenheim is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Davis New York and Guggenheim Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Risk Managed and Davis New 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 Davis New York are associated (or correlated) with Guggenheim Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Risk Managed has no effect on the direction of Davis New i.e., Davis New and Guggenheim Risk go up and down completely randomly.

Pair Corralation between Davis New and Guggenheim Risk

Assuming the 90 days horizon Davis New York is expected to generate 1.22 times more return on investment than Guggenheim Risk. However, Davis New is 1.22 times more volatile than Guggenheim Risk Managed. It trades about 0.16 of its potential returns per unit of risk. Guggenheim Risk Managed is currently generating about -0.05 per unit of risk. If you would invest  2,054  in Davis New York on September 13, 2024 and sell it today you would earn a total of  188.00  from holding Davis New York or generate 9.15% return on investment over 90 days.

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

Davis New York  vs.  Guggenheim Risk Managed

Davis New York

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis New York are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Davis New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guggenheim Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Davis New and Guggenheim Risk

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

The idea behind Davis New York and Guggenheim Risk Managed 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.