Correlation Between Inverse Mid-cap and Guggenheim Multi-hedge

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

By analyzing existing cross correlation between Inverse Mid Cap Strategy and Guggenheim Multi Hedge Strategies, you can compare the effects of market volatilities on Inverse Mid-cap and Guggenheim Multi-hedge 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 Inverse Mid-cap with a short position of Guggenheim Multi-hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Mid-cap and Guggenheim Multi-hedge.

Diversification Opportunities for Inverse Mid-cap and Guggenheim Multi-hedge

-0.31

Correlation Coefficient

Inverse Mid-cap  Guggenheim Multi-hedge

Very good diversification

The 3 months correlation between Inverse and Guggenheim is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Mid Cap Strategy and Guggenheim Multi Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Multi Hedge and Inverse 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 Inverse Mid Cap Strategy are associated (or correlated) with Guggenheim Multi-hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Multi Hedge has no effect on the direction of Inverse Mid-cap i.e., Inverse Mid-cap and Guggenheim Multi-hedge go up and down completely randomly.

Pair Corralation between Inverse Mid-cap and Guggenheim Multi-hedge

Assuming the 90 days horizon Inverse Mid Cap Strategy is expected to generate 9.21 times more return on investment than Guggenheim Multi-hedge. However, Inverse Mid-cap is 9.21 times more volatile than Guggenheim Multi Hedge Strategies. It trades about 0.01 of its potential returns per unit of risk. Guggenheim Multi Hedge Strategies is currently generating about -0.09 per unit of risk. If you would invest  3,916  in Inverse Mid Cap Strategy on October 23, 2024 and sell it today you would lose (100.00) from holding Inverse Mid Cap Strategy or give up 2.55% of portfolio value over 90 days.

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

Inverse Mid Cap Strategy  vs.  Guggenheim Multi Hedge Strateg

Inverse Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guggenheim Multi Hedge

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inverse Mid-cap and Guggenheim Multi-hedge

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

The idea behind Inverse Mid Cap Strategy and Guggenheim Multi Hedge Strategies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.