Correlation Between Mid Cap and Guggenheim Long

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Guggenheim Long Short, you can compare the effects of market volatilities on Mid Cap and Guggenheim Long 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 Mid Cap with a short position of Guggenheim Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Guggenheim Long.

Diversification Opportunities for Mid Cap and Guggenheim Long

0.0

Correlation Coefficient

Mid Cap  Guggenheim Long

Pay attention - limited upside

The 3 months correlation between Mid and Guggenheim is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Guggenheim Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Long Short and Mid Cap 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 Mid Cap 15x Strategy are associated (or correlated) with Guggenheim Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Long Short has no effect on the direction of Mid Cap i.e., Mid Cap and Guggenheim Long go up and down completely randomly.

Pair Corralation between Mid Cap and Guggenheim Long

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 2.84 times more return on investment than Guggenheim Long. However, Mid Cap is 2.84 times more volatile than Guggenheim Long Short. It trades about 0.04 of its potential returns per unit of risk. Guggenheim Long Short is currently generating about 0.07 per unit of risk. If you would invest  10,545  in Mid Cap 15x Strategy on October 8, 2024 and sell it today you would earn a total of  2,864  from holding Mid Cap 15x Strategy or generate 27.16% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Guggenheim Long Short

Mid Cap 15x

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guggenheim Long Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mid Cap and Guggenheim Long

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

The idea behind Mid Cap 15x Strategy and Guggenheim Long Short 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.