Correlation Between Guggenheim High and Diplomat Fund

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

By analyzing existing cross correlation between Guggenheim High Yield and The Diplomat, you can compare the effects of market volatilities on Guggenheim High and Diplomat Fund 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 High with a short position of Diplomat Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim High and Diplomat Fund.

Diversification Opportunities for Guggenheim High and Diplomat Fund

0.46

Correlation Coefficient

Guggenheim High  Diplomat Fund

Very weak diversification

The 3 months correlation between Guggenheim and Diplomat is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim High Yield and The Diplomat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diplomat Fund and Guggenheim High 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 High Yield are associated (or correlated) with Diplomat Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diplomat Fund has no effect on the direction of Guggenheim High i.e., Guggenheim High and Diplomat Fund go up and down completely randomly.

Pair Corralation between Guggenheim High and Diplomat Fund

Assuming the 90 days horizon Guggenheim High is expected to generate 3.47 times less return on investment than Diplomat Fund. But when comparing it to its historical volatility, Guggenheim High Yield is 3.03 times less risky than Diplomat Fund. It trades about 0.09 of its potential returns per unit of risk. The Diplomat is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  939.00  in The Diplomat on December 22, 2024 and sell it today you would earn a total of  33.00  from holding The Diplomat or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Guggenheim High Yield  vs.  The Diplomat

Guggenheim High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Guggenheim High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Diplomat Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Diplomat are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Diplomat Fund 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 High and Diplomat Fund

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

The idea behind Guggenheim High Yield and The Diplomat 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.