Correlation Between Federated Global and Gotham Neutral

Can any of the company-specific risk be diversified away by investing in both Federated Global 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 Federated Global and Gotham Neutral into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federated Global Allocation and Gotham Neutral Fund, you can compare the effects of market volatilities on Federated Global 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 Federated Global with a short position of Gotham Neutral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Global and Gotham Neutral.

Diversification Opportunities for Federated Global and Gotham Neutral

0.07

Correlation Coefficient

Federated Global  Gotham Neutral

Significant diversification

The 3 months correlation between FEDERATED and Gotham is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Allocation and Gotham Neutral Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Neutral and Federated Global 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 Federated Global Allocation 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 Federated Global i.e., Federated Global and Gotham Neutral go up and down completely randomly.

Pair Corralation between Federated Global and Gotham Neutral

Assuming the 90 days horizon Federated Global Allocation is expected to generate 1.85 times more return on investment than Gotham Neutral. However, Federated Global is 1.85 times more volatile than Gotham Neutral Fund. It trades about -0.07 of its potential returns per unit of risk. Gotham Neutral Fund is currently generating about -0.15 per unit of risk. If you would invest  1,993  in Federated Global Allocation on October 12, 2024 and sell it today you would lose (47.00) from holding Federated Global Allocation or give up 2.36% of portfolio value over 90 days.

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

Federated Global Allocation  vs.  Gotham Neutral Fund

Federated Global All

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gotham Neutral

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federated Global and Gotham Neutral

The main advantage of trading using opposite Federated Global and Gotham Neutral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Global 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.

The idea behind Federated Global Allocation and Gotham Neutral Fund 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.