Correlation Between Financial Industries and Gotham Absolute
Can any of the company-specific risk be diversified away by investing in both Financial Industries and Gotham Absolute 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 Financial Industries and Gotham Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Gotham Absolute Return, you can compare the effects of market volatilities on Financial Industries and Gotham Absolute 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 Financial Industries with a short position of Gotham Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Gotham Absolute.
Diversification Opportunities for Financial Industries and Gotham Absolute
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Gotham is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Gotham Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Absolute Return and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Gotham Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Absolute Return has no effect on the direction of Financial Industries i.e., Financial Industries and Gotham Absolute go up and down completely randomly.
Pair Corralation between Financial Industries and Gotham Absolute
Assuming the 90 days horizon Financial Industries Fund is expected to under-perform the Gotham Absolute. In addition to that, Financial Industries is 2.06 times more volatile than Gotham Absolute Return. It trades about -0.15 of its total potential returns per unit of risk. Gotham Absolute Return is currently generating about -0.06 per unit of volatility. If you would invest 2,032 in Gotham Absolute Return on November 28, 2024 and sell it today you would lose (10.00) from holding Gotham Absolute Return or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Financial Industries Fund vs. Gotham Absolute Return
Performance |
| Timeline |
| Financial Industries |
| Gotham Absolute Return |
Financial Industries and Gotham Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Gotham Absolute
The main advantage of trading using opposite Financial Industries and Gotham Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Gotham Absolute 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 Absolute will offset losses from the drop in Gotham Absolute's long position.| Financial Industries vs. Siit Small Cap | Financial Industries vs. Transamerica International Small | Financial Industries vs. Ab Small Cap | Financial Industries vs. Champlain Small |
| Gotham Absolute vs. Schwab Health Care | Gotham Absolute vs. Eaton Vance Worldwide | Gotham Absolute vs. Baron Health Care | Gotham Absolute vs. Blackrock Health Sciences |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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