Correlation Between Gotham Neutral and Gotham Enhanced
Can any of the company-specific risk be diversified away by investing in both Gotham Neutral and Gotham Enhanced 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 Neutral and Gotham Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gotham Neutral Fund and Gotham Enhanced Sp, you can compare the effects of market volatilities on Gotham Neutral and Gotham Enhanced 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 Neutral with a short position of Gotham Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Neutral and Gotham Enhanced.
Diversification Opportunities for Gotham Neutral and Gotham Enhanced
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gotham and Gotham is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Neutral Fund and Gotham Enhanced Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Enhanced Sp and Gotham Neutral 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 Neutral Fund are associated (or correlated) with Gotham Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Enhanced Sp has no effect on the direction of Gotham Neutral i.e., Gotham Neutral and Gotham Enhanced go up and down completely randomly.
Pair Corralation between Gotham Neutral and Gotham Enhanced
Assuming the 90 days horizon Gotham Neutral Fund is expected to under-perform the Gotham Enhanced. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gotham Neutral Fund is 2.54 times less risky than Gotham Enhanced. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Gotham Enhanced Sp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,922 in Gotham Enhanced Sp on August 26, 2024 and sell it today you would earn a total of 86.00 from holding Gotham Enhanced Sp or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gotham Neutral Fund vs. Gotham Enhanced Sp
Performance |
| Timeline |
| Gotham Neutral |
| Gotham Enhanced Sp |
Gotham Neutral and Gotham Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gotham Neutral and Gotham Enhanced
The main advantage of trading using opposite Gotham Neutral and Gotham Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gotham Neutral position performs unexpectedly, Gotham Enhanced 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 Enhanced will offset losses from the drop in Gotham Enhanced's long position.| Gotham Neutral vs. Shelton Emerging Markets | Gotham Neutral vs. Origin Emerging Markets | Gotham Neutral vs. Extended Market Index | Gotham Neutral vs. Barings Emerging Markets |
| Gotham Enhanced vs. Gotham Enhanced Return | Gotham Enhanced vs. Gotham Absolute Return | Gotham Enhanced vs. Gotham Large Value | Gotham Enhanced vs. Gotham Neutral Fund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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