Correlation Between Gotham Total and Gotham Enhanced
Can any of the company-specific risk be diversified away by investing in both Gotham Total 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 Total 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 Total Return and Gotham Enhanced Sp, you can compare the effects of market volatilities on Gotham Total 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 Total with a short position of Gotham Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Total and Gotham Enhanced.
Diversification Opportunities for Gotham Total and Gotham Enhanced
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GOTHAM and Gotham is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Total Return 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 Total 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 Total Return 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 Total i.e., Gotham Total and Gotham Enhanced go up and down completely randomly.
Pair Corralation between Gotham Total and Gotham Enhanced
Assuming the 90 days horizon Gotham Total Return is expected to generate 0.81 times more return on investment than Gotham Enhanced. However, Gotham Total Return is 1.24 times less risky than Gotham Enhanced. It trades about -0.03 of its potential returns per unit of risk. Gotham Enhanced Sp is currently generating about -0.05 per unit of risk. If you would invest 1,320 in Gotham Total Return on November 28, 2024 and sell it today you would lose (4.00) from holding Gotham Total Return or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gotham Total Return vs. Gotham Enhanced Sp
Performance |
| Timeline |
| Gotham Total Return |
| Gotham Enhanced Sp |
Gotham Total and Gotham Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gotham Total and Gotham Enhanced
The main advantage of trading using opposite Gotham Total and Gotham Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gotham Total 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 Total vs. Gotham Neutral Fund | Gotham Total vs. Gotham Index Plus | Gotham Total vs. Gotham Absolute Return | Gotham Total vs. Gotham Large Value |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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