Correlation Between Guggenheim Large and Century Small

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

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

Diversification Opportunities for Guggenheim Large and Century Small

0.72

Correlation Coefficient

Guggenheim Large  Century Small

Poor diversification

The 3 months correlation between Guggenheim and Century is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Large Cap and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap and Guggenheim Large 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 Large Cap are associated (or correlated) with Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Guggenheim Large i.e., Guggenheim Large and Century Small go up and down completely randomly.

Pair Corralation between Guggenheim Large and Century Small

Assuming the 90 days horizon Guggenheim Large is expected to generate 3.25 times less return on investment than Century Small. But when comparing it to its historical volatility, Guggenheim Large Cap is 1.3 times less risky than Century Small. It trades about 0.02 of its potential returns per unit of risk. Century Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,975  in Century Small Cap on December 4, 2024 and sell it today you would earn a total of  827.00  from holding Century Small Cap or generate 27.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Guggenheim Large Cap  vs.  Century Small Cap

Guggenheim Large Cap

Risk-Adjusted Performance

Very Weak

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

Century Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Century Small Cap 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Guggenheim Large and Century Small

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

The idea behind Guggenheim Large Cap and Century Small Cap 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.