Correlation Between Equity Growth and Gotham Defensive
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Gotham Defensive 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 Growth and Gotham Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Gotham Defensive Long, you can compare the effects of market volatilities on Equity Growth and Gotham Defensive 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 Growth with a short position of Gotham Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Gotham Defensive.
Diversification Opportunities for Equity Growth and Gotham Defensive
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Gotham is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Gotham Defensive Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Defensive Long and Equity Growth 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 Growth Fund are associated (or correlated) with Gotham Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Defensive Long has no effect on the direction of Equity Growth i.e., Equity Growth and Gotham Defensive go up and down completely randomly.
Pair Corralation between Equity Growth and Gotham Defensive
Assuming the 90 days horizon Equity Growth Fund is expected to under-perform the Gotham Defensive. But the mutual fund apears to be less risky and, when comparing its historical volatility, Equity Growth Fund is 1.11 times less risky than Gotham Defensive. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Gotham Defensive Long is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,880 in Gotham Defensive Long on November 28, 2024 and sell it today you would earn a total of 65.00 from holding Gotham Defensive Long or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. Gotham Defensive Long
Performance |
| Timeline |
| Equity Growth |
| Gotham Defensive Long |
Equity Growth and Gotham Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Gotham Defensive
The main advantage of trading using opposite Equity Growth and Gotham Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Gotham Defensive 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 Gotham Defensive will offset losses from the drop in Gotham Defensive's long position.| Equity Growth vs. Allianzgi Technology Fund | Equity Growth vs. Dreyfus Technology Growth | Equity Growth vs. T Rowe Price | Equity Growth vs. Pgim Jennison Technology |
| Gotham Defensive vs. Clearbridge Energy Mlp | Gotham Defensive vs. Pimco Energy Tactical | Gotham Defensive vs. Short Oil Gas | Gotham Defensive vs. Gamco Natural Resources |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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