Correlation Between Westwood Alternative and Guggenheim Risk

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

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

Diversification Opportunities for Westwood Alternative and Guggenheim Risk

0.84

Correlation Coefficient

Westwood Alternative  Guggenheim Risk

Very poor diversification

The 3 months correlation between Westwood and Guggenheim is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Alternative Income and Guggenheim Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Risk Managed and Westwood Alternative 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 Westwood Alternative Income are associated (or correlated) with Guggenheim Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Risk Managed has no effect on the direction of Westwood Alternative i.e., Westwood Alternative and Guggenheim Risk go up and down completely randomly.

Pair Corralation between Westwood Alternative and Guggenheim Risk

Assuming the 90 days horizon Westwood Alternative Income is expected to generate 0.1 times more return on investment than Guggenheim Risk. However, Westwood Alternative Income is 10.17 times less risky than Guggenheim Risk. It trades about 0.18 of its potential returns per unit of risk. Guggenheim Risk Managed is currently generating about -0.06 per unit of risk. If you would invest  968.00  in Westwood Alternative Income on December 2, 2024 and sell it today you would earn a total of  8.00  from holding Westwood Alternative Income or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	78.69%
Values	Daily Returns

Westwood Alternative Income  vs.  Guggenheim Risk Managed

Westwood Alternative

Risk-Adjusted Performance

Good

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

Guggenheim Risk Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Westwood Alternative and Guggenheim Risk

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

The idea behind Westwood Alternative Income and Guggenheim Risk Managed 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.