Correlation Between Guggenheim Municipal and Vanguard Long-term
Can any of the company-specific risk be diversified away by investing in both Guggenheim Municipal and Vanguard Long-term 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 Municipal and Vanguard Long-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guggenheim Municipal Income and Vanguard Long Term Tax Exempt, you can compare the effects of market volatilities on Guggenheim Municipal and Vanguard Long-term 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 Municipal with a short position of Vanguard Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guggenheim Municipal and Vanguard Long-term.
Diversification Opportunities for Guggenheim Municipal and Vanguard Long-term
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Guggenheim and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Municipal Income and Vanguard Long Term Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and Guggenheim Municipal 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 Municipal Income are associated (or correlated) with Vanguard Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Guggenheim Municipal i.e., Guggenheim Municipal and Vanguard Long-term go up and down completely randomly.
Pair Corralation between Guggenheim Municipal and Vanguard Long-term
Assuming the 90 days horizon Guggenheim Municipal is expected to generate 2.29 times less return on investment than Vanguard Long-term. In addition to that, Guggenheim Municipal is 1.03 times more volatile than Vanguard Long Term Tax Exempt. It trades about 0.02 of its total potential returns per unit of risk. Vanguard Long Term Tax Exempt is currently generating about 0.04 per unit of volatility. If you would invest 1,018 in Vanguard Long Term Tax Exempt on January 18, 2024 and sell it today you would earn a total of 58.00 from holding Vanguard Long Term Tax Exempt or generate 5.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Guggenheim Municipal Income vs. Vanguard Long Term Tax Exempt
Performance |
Timeline |
Guggenheim Municipal |
Vanguard Long Term |
Guggenheim Municipal and Vanguard Long-term Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Guggenheim Municipal and Vanguard Long-term
The main advantage of trading using opposite Guggenheim Municipal and Vanguard Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Municipal position performs unexpectedly, Vanguard Long-term 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 Vanguard Long-term will offset losses from the drop in Vanguard Long-term's long position.The idea behind Guggenheim Municipal Income and Vanguard Long Term Tax Exempt 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.
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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