Correlation Between Gotham Enhanced and ALPS

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

By analyzing existing cross correlation between Gotham Enhanced 500 and ALPS, you can compare the effects of market volatilities on Gotham Enhanced and ALPS 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 Enhanced with a short position of ALPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Enhanced and ALPS.

Diversification Opportunities for Gotham Enhanced and ALPS

0.45

Correlation Coefficient

Gotham Enhanced  ALPS

Very weak diversification

The 3 months correlation between Gotham and ALPS is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Enhanced 500 and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS and Gotham Enhanced 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 Enhanced 500 are associated (or correlated) with ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of Gotham Enhanced i.e., Gotham Enhanced and ALPS go up and down completely randomly.

Pair Corralation between Gotham Enhanced and ALPS

Given the investment horizon of 90 days Gotham Enhanced is expected to generate 1.25 times less return on investment than ALPS. But when comparing it to its historical volatility, Gotham Enhanced 500 is 1.21 times less risky than ALPS. It trades about 0.12 of its potential returns per unit of risk. ALPS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,081  in ALPS on October 21, 2024 and sell it today you would earn a total of  363.00  from holding ALPS or generate 17.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	27.75%
Values	Daily Returns

Gotham Enhanced 500  vs.  ALPS

Gotham Enhanced 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gotham Enhanced 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gotham Enhanced is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ALPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ALPS is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gotham Enhanced and ALPS

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

The idea behind Gotham Enhanced 500 and ALPS 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.