Correlation Between Guggenheim Large and Guggenheim Styleplus

Can any of the company-specific risk be diversified away by investing in both Guggenheim Large and Guggenheim Styleplus 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 Guggenheim Styleplus 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 Guggenheim Styleplus , you can compare the effects of market volatilities on Guggenheim Large and Guggenheim Styleplus 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 Guggenheim Styleplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Large and Guggenheim Styleplus.

Diversification Opportunities for Guggenheim Large and Guggenheim Styleplus

0.93

Correlation Coefficient

Guggenheim Large  Guggenheim Styleplus

Almost no diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Large Cap and Guggenheim Styleplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Styleplus 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 Guggenheim Styleplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Styleplus has no effect on the direction of Guggenheim Large i.e., Guggenheim Large and Guggenheim Styleplus go up and down completely randomly.

Pair Corralation between Guggenheim Large and Guggenheim Styleplus

Assuming the 90 days horizon Guggenheim Large Cap is expected to generate 0.82 times more return on investment than Guggenheim Styleplus. However, Guggenheim Large Cap is 1.22 times less risky than Guggenheim Styleplus. It trades about -0.02 of its potential returns per unit of risk. Guggenheim Styleplus is currently generating about -0.12 per unit of risk. If you would invest  4,454  in Guggenheim Large Cap on December 24, 2024 and sell it today you would lose (46.00) from holding Guggenheim Large Cap or give up 1.03% of portfolio value over 90 days.

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

Guggenheim Large Cap  vs.  Guggenheim Styleplus

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 fairly strong basic indicators, Guggenheim Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guggenheim Styleplus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guggenheim Styleplus 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.

Pair Trading with Guggenheim Large and Guggenheim Styleplus

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

The idea behind Guggenheim Large Cap and Guggenheim Styleplus 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.