Correlation Between Equity Income and Guggenheim Directional

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

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

Diversification Opportunities for Equity Income and Guggenheim Directional

0.82

Correlation Coefficient

Equity Income  Guggenheim Directional

Very poor diversification

The 3 months correlation between Equity and Guggenheim is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Guggenheim Directional Allocat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Directional and Equity Income 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 Equity Income Fund are associated (or correlated) with Guggenheim Directional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Directional has no effect on the direction of Equity Income i.e., Equity Income and Guggenheim Directional go up and down completely randomly.

Pair Corralation between Equity Income and Guggenheim Directional

Assuming the 90 days horizon Equity Income is expected to generate 2.3 times less return on investment than Guggenheim Directional. But when comparing it to its historical volatility, Equity Income Fund is 1.02 times less risky than Guggenheim Directional. It trades about 0.13 of its potential returns per unit of risk. Guggenheim Directional Allocation is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,643  in Guggenheim Directional Allocation on March 22, 2024 and sell it today you would earn a total of  131.00  from holding Guggenheim Directional Allocation or generate 7.97% return on investment over 90 days.

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

Equity Income Fund  vs.  Guggenheim Directional Allocat

Equity Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Income Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Equity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guggenheim Directional

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Directional Allocation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guggenheim Directional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Equity Income and Guggenheim Directional

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

The idea behind Equity Income Fund and Guggenheim Directional 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.