Correlation Between Guggenheim Managed and Federated Equity

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

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

Diversification Opportunities for Guggenheim Managed and Federated Equity

0.36

Correlation Coefficient

Guggenheim Managed  Federated Equity

Weak diversification

The 3 months correlation between Guggenheim and Federated is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Managed Futures and Federated Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Equity Income and Guggenheim Managed 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 Managed Futures are associated (or correlated) with Federated Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Equity Income has no effect on the direction of Guggenheim Managed i.e., Guggenheim Managed and Federated Equity go up and down completely randomly.

Pair Corralation between Guggenheim Managed and Federated Equity

Assuming the 90 days horizon Guggenheim Managed Futures is expected to under-perform the Federated Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Guggenheim Managed Futures is 1.34 times less risky than Federated Equity. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Federated Equity Income is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,377  in Federated Equity Income on October 8, 2024 and sell it today you would lose (169.00) from holding Federated Equity Income or give up 7.11% of portfolio value over 90 days.

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

Guggenheim Managed Futures  vs.  Federated Equity Income

Guggenheim Managed

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Managed Futures are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Guggenheim Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Equity Income 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 technical and fundamental 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 Guggenheim Managed and Federated Equity

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

The idea behind Guggenheim Managed Futures and Federated Equity Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.