Correlation Between Gotham Index and Gotham Defensive
Can any of the company-specific risk be diversified away by investing in both Gotham Index 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 Gotham Index and Gotham Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gotham Index Plus and Gotham Defensive Long, you can compare the effects of market volatilities on Gotham Index 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 Gotham Index with a short position of Gotham Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Index and Gotham Defensive.
Diversification Opportunities for Gotham Index and Gotham Defensive
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gotham and Gotham is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Index Plus 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 Gotham Index 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 Gotham Index Plus 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 Gotham Index i.e., Gotham Index and Gotham Defensive go up and down completely randomly.
Pair Corralation between Gotham Index and Gotham Defensive
Assuming the 90 days horizon Gotham Index Plus is expected to generate 1.13 times more return on investment than Gotham Defensive. However, Gotham Index is 1.13 times more volatile than Gotham Defensive Long. It trades about 0.15 of its potential returns per unit of risk. Gotham Defensive Long is currently generating about 0.13 per unit of risk. If you would invest 2,828 in Gotham Index Plus on August 26, 2024 and sell it today you would earn a total of 80.00 from holding Gotham Index Plus or generate 2.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gotham Index Plus vs. Gotham Defensive Long
Performance |
| Timeline |
| Gotham Index Plus |
| Gotham Defensive Long |
Gotham Index and Gotham Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gotham Index and Gotham Defensive
The main advantage of trading using opposite Gotham Index and Gotham Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gotham Index 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.| Gotham Index vs. Gotham Enhanced Return | Gotham Index vs. Gotham Absolute Return | Gotham Index vs. Gotham Large Value | Gotham Index vs. Gotham Neutral Fund |
| Gotham Defensive vs. Gotham Hedged E | Gotham Defensive vs. Gotham Large Value | Gotham Defensive vs. Gotham Enhanced 500 | Gotham Defensive vs. Gotham Enhanced Return |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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