Correlation Between Gotham Index and Gotham Enhanced

Can any of the company-specific risk be diversified away by investing in both Gotham Index 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 Index 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 Index Plus and Gotham Enhanced Return, you can compare the effects of market volatilities on Gotham Index 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 Index with a short position of Gotham Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Index and Gotham Enhanced.

Diversification Opportunities for Gotham Index and Gotham Enhanced

0.69

Correlation Coefficient

Gotham Index  Gotham Enhanced

Poor diversification

The 3 months correlation between Gotham and Gotham is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Index Plus and Gotham Enhanced Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Enhanced Return and Gotham Index 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 Index Plus 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 Return has no effect on the direction of Gotham Index i.e., Gotham Index and Gotham Enhanced go up and down completely randomly.

Pair Corralation between Gotham Index and Gotham Enhanced

Assuming the 90 days horizon Gotham Index Plus is expected to generate 0.59 times more return on investment than Gotham Enhanced. However, Gotham Index Plus is 1.68 times less risky than Gotham Enhanced. It trades about 0.07 of its potential returns per unit of risk. Gotham Enhanced Return is currently generating about 0.0 per unit of risk. If you would invest  2,516  in Gotham Index Plus on October 12, 2024 and sell it today you would earn a total of  286.00  from holding Gotham Index Plus or generate 11.37% return on investment over 90 days.

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

Gotham Index Plus  vs.  Gotham Enhanced Return

Gotham Index Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gotham Enhanced Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gotham Enhanced Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Gotham Index and Gotham Enhanced

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

The idea behind Gotham Index Plus and Gotham Enhanced Return 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.