Correlation Between Guggenheim Directional and Guggenheim Municipal

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

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

Diversification Opportunities for Guggenheim Directional and Guggenheim Municipal

0.4

Correlation Coefficient

Guggenheim Directional  Guggenheim Municipal

Very weak diversification

The 3 months correlation between Guggenheim and Guggenheim is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Directional Allocat and Guggenheim Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Municipal and Guggenheim Directional 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 Directional Allocation are associated (or correlated) with Guggenheim Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Municipal has no effect on the direction of Guggenheim Directional i.e., Guggenheim Directional and Guggenheim Municipal go up and down completely randomly.

Pair Corralation between Guggenheim Directional and Guggenheim Municipal

Assuming the 90 days horizon Guggenheim Directional Allocation is expected to under-perform the Guggenheim Municipal. In addition to that, Guggenheim Directional is 6.64 times more volatile than Guggenheim Municipal Income. It trades about -0.12 of its total potential returns per unit of risk. Guggenheim Municipal Income is currently generating about 0.0 per unit of volatility. If you would invest  1,139  in Guggenheim Municipal Income on October 6, 2024 and sell it today you would lose (1.00) from holding Guggenheim Municipal Income or give up 0.09% of portfolio value over 90 days.

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

Guggenheim Directional Allocat  vs.  Guggenheim Municipal Income

Guggenheim Directional

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guggenheim Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guggenheim Municipal 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 Directional and Guggenheim Municipal

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

The idea behind Guggenheim Directional Allocation and Guggenheim Municipal Income 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.