Correlation Between Sp Smallcap and Guggenheim Multi-hedge

Can any of the company-specific risk be diversified away by investing in both Sp Smallcap 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 Sp Smallcap 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 Sp Smallcap 600 and Guggenheim Multi Hedge Strategies, you can compare the effects of market volatilities on Sp Smallcap 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 Sp Smallcap with a short position of Guggenheim Multi-hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Guggenheim Multi-hedge.

Diversification Opportunities for Sp Smallcap and Guggenheim Multi-hedge

0.85

Correlation Coefficient

Sp Smallcap  Guggenheim Multi-hedge

Very poor diversification

The 3 months correlation between RYWAX and GUGGENHEIM is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 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 Sp Smallcap 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 Sp Smallcap 600 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 Sp Smallcap i.e., Sp Smallcap and Guggenheim Multi-hedge go up and down completely randomly.

Pair Corralation between Sp Smallcap and Guggenheim Multi-hedge

Assuming the 90 days horizon Sp Smallcap 600 is expected to under-perform the Guggenheim Multi-hedge. In addition to that, Sp Smallcap is 3.77 times more volatile than Guggenheim Multi Hedge Strategies. It trades about -0.08 of its total potential returns per unit of risk. Guggenheim Multi Hedge Strategies is currently generating about -0.14 per unit of volatility. If you would invest  2,486  in Guggenheim Multi Hedge Strategies on December 22, 2024 and sell it today you would lose (70.00) from holding Guggenheim Multi Hedge Strategies or give up 2.82% of portfolio value over 90 days.

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

Sp Smallcap 600  vs.  Guggenheim Multi Hedge Strateg

Sp Smallcap 600

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Smallcap 600 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Guggenheim Multi Hedge

Risk-Adjusted Performance

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 Sp Smallcap and Guggenheim Multi-hedge

The main advantage of trading using opposite Sp Smallcap and Guggenheim Multi-hedge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap 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 Sp Smallcap 600 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.