Correlation Between Touchstone International and Guggenheim Directional

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

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

Diversification Opportunities for Touchstone International and Guggenheim Directional

-0.48

Correlation Coefficient

Touchstone International  Guggenheim Directional

Very good diversification

The 3 months correlation between Touchstone and Guggenheim is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Guggenheim Directional Allocat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Directional and Touchstone International 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 Touchstone International Equity are associated (or correlated) with Guggenheim Directional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Directional has no effect on the direction of Touchstone International i.e., Touchstone International and Guggenheim Directional go up and down completely randomly.

Pair Corralation between Touchstone International and Guggenheim Directional

Assuming the 90 days horizon Touchstone International Equity is expected to under-perform the Guggenheim Directional. In addition to that, Touchstone International is 2.95 times more volatile than Guggenheim Directional Allocation. It trades about -0.15 of its total potential returns per unit of risk. Guggenheim Directional Allocation is currently generating about 0.15 per unit of volatility. If you would invest  1,953  in Guggenheim Directional Allocation on September 14, 2024 and sell it today you would earn a total of  28.00  from holding Guggenheim Directional Allocation or generate 1.43% return on investment over 90 days.

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

Touchstone International Equit  vs.  Guggenheim Directional Allocat

Touchstone International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone International Equity 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.

Guggenheim Directional

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Directional Allocation are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Guggenheim Directional may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Touchstone International and Guggenheim Directional

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

The idea behind Touchstone International Equity and Guggenheim Directional Allocation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.