Correlation Between Guggenheim High and Aggressive Balanced

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

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

Diversification Opportunities for Guggenheim High and Aggressive Balanced

0.74

Correlation Coefficient

Guggenheim High  Aggressive Balanced

Poor diversification

The 3 months correlation between Guggenheim and Aggressive is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim High Yield and Aggressive Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Balanced and Guggenheim High 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 High Yield are associated (or correlated) with Aggressive Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Balanced has no effect on the direction of Guggenheim High i.e., Guggenheim High and Aggressive Balanced go up and down completely randomly.

Pair Corralation between Guggenheim High and Aggressive Balanced

Assuming the 90 days horizon Guggenheim High is expected to generate 5.12 times less return on investment than Aggressive Balanced. But when comparing it to its historical volatility, Guggenheim High Yield is 4.71 times less risky than Aggressive Balanced. It trades about 0.17 of its potential returns per unit of risk. Aggressive Balanced Allocation is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,218  in Aggressive Balanced Allocation on August 15, 2024 and sell it today you would earn a total of  32.00  from holding Aggressive Balanced Allocation or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Guggenheim High Yield  vs.  Aggressive Balanced Allocation

Guggenheim High Yield

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim High Yield are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Guggenheim High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aggressive Balanced

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Balanced Allocation are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aggressive Balanced may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Guggenheim High and Aggressive Balanced

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

The idea behind Guggenheim High Yield and Aggressive Balanced 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.