Correlation Between Power REIT and Guggenheim Risk

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

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

Diversification Opportunities for Power REIT and Guggenheim Risk

-0.55

Correlation Coefficient

Power REIT  Guggenheim Risk

Excellent diversification

The 3 months correlation between Power and Guggenheim is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT 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 Power REIT 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 Power REIT 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 Power REIT i.e., Power REIT and Guggenheim Risk go up and down completely randomly.

Pair Corralation between Power REIT and Guggenheim Risk

Allowing for the 90-day total investment horizon Power REIT is expected to under-perform the Guggenheim Risk. In addition to that, Power REIT is 5.03 times more volatile than Guggenheim Risk Managed. It trades about 0.0 of its total potential returns per unit of risk. Guggenheim Risk Managed is currently generating about 0.02 per unit of volatility. If you would invest  3,191  in Guggenheim Risk Managed on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Guggenheim Risk Managed or generate 0.85% return on investment over 90 days.

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

Power REIT  vs.  Guggenheim Risk Managed

Power REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Power REIT is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Guggenheim Risk Managed

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Risk Managed are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Power REIT and Guggenheim Risk

The main advantage of trading using opposite Power REIT and Guggenheim Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT 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.

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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.