Correlation Between Gotham Index and Gotham Neutral
Can any of the company-specific risk be diversified away by investing in both Gotham Index and Gotham Neutral 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 Neutral 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 Neutral Fund, you can compare the effects of market volatilities on Gotham Index and Gotham Neutral 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 Neutral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Index and Gotham Neutral.
Diversification Opportunities for Gotham Index and Gotham Neutral
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gotham and Gotham is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Index Plus and Gotham Neutral Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Neutral 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 Neutral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Neutral has no effect on the direction of Gotham Index i.e., Gotham Index and Gotham Neutral go up and down completely randomly.
Pair Corralation between Gotham Index and Gotham Neutral
Assuming the 90 days horizon Gotham Index Plus is expected to generate 2.57 times more return on investment than Gotham Neutral. However, Gotham Index is 2.57 times more volatile than Gotham Neutral Fund. It trades about 0.15 of its potential returns per unit of risk. Gotham Neutral Fund is currently generating about -0.17 per unit of risk. If you would invest 2,847 in Gotham Index Plus on August 30, 2024 and sell it today you would earn a total of 81.00 from holding Gotham Index Plus or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gotham Index Plus vs. Gotham Neutral Fund
Performance |
| Timeline |
| Gotham Index Plus |
| Gotham Neutral |
Gotham Index and Gotham Neutral Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gotham Index and Gotham Neutral
The main advantage of trading using opposite Gotham Index and Gotham Neutral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gotham Index position performs unexpectedly, Gotham Neutral 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 Neutral will offset losses from the drop in Gotham Neutral'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 Neutral vs. California Bond Fund | Gotham Neutral vs. Ab Global Bond | Gotham Neutral vs. Dreyfusstandish Global Fixed | Gotham Neutral vs. Ms Global Fixed |
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 Correlations module to find global opportunities by holding instruments from different markets.
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