Correlation Between Small Cap and Guggenheim Diversified

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

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

Diversification Opportunities for Small Cap and Guggenheim Diversified

0.0

Correlation Coefficient

Small Cap  Guggenheim Diversified

Pay attention - limited upside

The 3 months correlation between Small and Guggenheim is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Guggenheim Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Diversified and Small Cap 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 Small Cap Stock are associated (or correlated) with Guggenheim Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Diversified has no effect on the direction of Small Cap i.e., Small Cap and Guggenheim Diversified go up and down completely randomly.

Pair Corralation between Small Cap and Guggenheim Diversified

If you would invest  1,327  in Small Cap Stock on October 24, 2024 and sell it today you would earn a total of  51.00  from holding Small Cap Stock or generate 3.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Small Cap Stock  vs.  Guggenheim Diversified Income

Small Cap Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guggenheim Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Diversified Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guggenheim Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Guggenheim Diversified

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

The idea behind Small Cap Stock and Guggenheim Diversified 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.