Correlation Between Guggenheim Alpha and Guggenheim World

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

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

Diversification Opportunities for Guggenheim Alpha and Guggenheim World

0.75

Correlation Coefficient

Guggenheim Alpha  Guggenheim World

Poor diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Alpha Opportunity and Guggenheim World Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim World Equity and Guggenheim Alpha 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 Alpha Opportunity are associated (or correlated) with Guggenheim World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim World Equity has no effect on the direction of Guggenheim Alpha i.e., Guggenheim Alpha and Guggenheim World go up and down completely randomly.

Pair Corralation between Guggenheim Alpha and Guggenheim World

Assuming the 90 days horizon Guggenheim Alpha is expected to generate 2.22 times less return on investment than Guggenheim World. In addition to that, Guggenheim Alpha is 1.23 times more volatile than Guggenheim World Equity. It trades about 0.05 of its total potential returns per unit of risk. Guggenheim World Equity is currently generating about 0.15 per unit of volatility. If you would invest  1,706  in Guggenheim World Equity on September 5, 2024 and sell it today you would earn a total of  79.00  from holding Guggenheim World Equity or generate 4.63% return on investment over 90 days.

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

Guggenheim Alpha Opportunity  vs.  Guggenheim World Equity

Guggenheim Alpha Opp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Alpha Opportunity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim Alpha is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guggenheim World Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim World Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guggenheim Alpha and Guggenheim World

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

The idea behind Guggenheim Alpha Opportunity and Guggenheim World Equity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.