Correlation Between Guggenheim Directional and Ultra Short

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

Diversification Opportunities for Guggenheim Directional and Ultra Short

-0.63

Correlation Coefficient

Guggenheim Directional  Ultra Short

Excellent diversification

The 3 months correlation between Guggenheim and Ultra is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Directional Allocat and Ultra Short Term Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Short Term 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 Ultra Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Short Term has no effect on the direction of Guggenheim Directional i.e., Guggenheim Directional and Ultra Short go up and down completely randomly.

Pair Corralation between Guggenheim Directional and Ultra Short

Assuming the 90 days horizon Guggenheim Directional Allocation is expected to generate 18.35 times more return on investment than Ultra Short. However, Guggenheim Directional is 18.35 times more volatile than Ultra Short Term Fixed. It trades about 0.04 of its potential returns per unit of risk. Ultra Short Term Fixed is currently generating about 0.46 per unit of risk. If you would invest  1,280  in Guggenheim Directional Allocation on October 22, 2024 and sell it today you would earn a total of  215.00  from holding Guggenheim Directional Allocation or generate 16.8% return on investment over 90 days.

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

Guggenheim Directional Allocat  vs.  Ultra Short Term Fixed

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 fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ultra Short Term

Risk-Adjusted Performance

40 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Fixed are ranked lower than 40 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short 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 Ultra Short

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

The idea behind Guggenheim Directional Allocation and Ultra Short Term Fixed 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.