Correlation Between Eventide Gilead and Transam Short-term

Can any of the company-specific risk be diversified away by investing in both Eventide Gilead and Transam Short-term 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 Eventide Gilead and Transam Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eventide Gilead Fund and Transam Short Term Bond, you can compare the effects of market volatilities on Eventide Gilead and Transam Short-term 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 Eventide Gilead with a short position of Transam Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eventide Gilead and Transam Short-term.

Diversification Opportunities for Eventide Gilead and Transam Short-term

0.15

Correlation Coefficient

Eventide Gilead  Transam Short-term

Average diversification

The 3 months correlation between Eventide and Transam is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Eventide Gilead Fund and Transam Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transam Short Term and Eventide Gilead 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 Eventide Gilead Fund are associated (or correlated) with Transam Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transam Short Term has no effect on the direction of Eventide Gilead i.e., Eventide Gilead and Transam Short-term go up and down completely randomly.

Pair Corralation between Eventide Gilead and Transam Short-term

Assuming the 90 days horizon Eventide Gilead Fund is expected to under-perform the Transam Short-term. In addition to that, Eventide Gilead is 18.41 times more volatile than Transam Short Term Bond. It trades about -0.11 of its total potential returns per unit of risk. Transam Short Term Bond is currently generating about -0.22 per unit of volatility. If you would invest  982.00  in Transam Short Term Bond on October 10, 2024 and sell it today you would lose (3.00) from holding Transam Short Term Bond or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eventide Gilead Fund  vs.  Transam Short Term Bond

Eventide Gilead

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eventide Gilead Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Eventide Gilead is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transam Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transam Short Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Transam Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eventide Gilead and Transam Short-term

The main advantage of trading using opposite Eventide Gilead and Transam Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eventide Gilead position performs unexpectedly, Transam Short-term 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 Transam Short-term will offset losses from the drop in Transam Short-term's long position.

The idea behind Eventide Gilead Fund and Transam Short Term Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.