Correlation Between Extended Market and Gotham Neutral
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Gotham Neutral into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Gotham Neutral Fund, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Gotham Neutral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Gotham Neutral.
Diversification Opportunities for Extended Market and Gotham Neutral
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Extended and Gotham is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Gotham Neutral Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Neutral and Extended Market 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 Extended Market Index 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 Extended Market i.e., Extended Market and Gotham Neutral go up and down completely randomly.
Pair Corralation between Extended Market and Gotham Neutral
Assuming the 90 days horizon Extended Market is expected to generate 1.66 times less return on investment than Gotham Neutral. In addition to that, Extended Market is 3.75 times more volatile than Gotham Neutral Fund. It trades about 0.03 of its total potential returns per unit of risk. Gotham Neutral Fund is currently generating about 0.18 per unit of volatility. If you would invest 1,060 in Gotham Neutral Fund on November 19, 2024 and sell it today you would earn a total of 356.00 from holding Gotham Neutral Fund or generate 33.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Gotham Neutral Fund
Performance |
| Timeline |
| Extended Market Index |
| Gotham Neutral |
Extended Market and Gotham Neutral Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Gotham Neutral
The main advantage of trading using opposite Extended Market and Gotham Neutral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Rbc Emerging Markets | Extended Market vs. Templeton Developing Markets | Extended Market vs. Locorr Market Trend | Extended Market vs. Calvert Developed Market |
| Gotham Neutral vs. Artisan Select Equity | Gotham Neutral vs. Enhanced Fixed Income | Gotham Neutral vs. Aqr Long Short Equity | Gotham Neutral vs. Qs Global Equity |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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