Correlation Between Gotham Large and Swan Hedged

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

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

Diversification Opportunities for Gotham Large and Swan Hedged

0.1

Correlation Coefficient

Gotham Large  Swan Hedged

Average diversification

The 3 months correlation between Gotham and Swan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Large Value and Swan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Hedged Equity and Gotham Large 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 Large Value are associated (or correlated) with Swan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Hedged Equity has no effect on the direction of Gotham Large i.e., Gotham Large and Swan Hedged go up and down completely randomly.

Pair Corralation between Gotham Large and Swan Hedged

Assuming the 90 days horizon Gotham Large Value is expected to under-perform the Swan Hedged. In addition to that, Gotham Large is 4.23 times more volatile than Swan Hedged Equity. It trades about -0.24 of its total potential returns per unit of risk. Swan Hedged Equity is currently generating about -0.12 per unit of volatility. If you would invest  2,285  in Swan Hedged Equity on October 11, 2024 and sell it today you would lose (31.00) from holding Swan Hedged Equity or give up 1.36% of portfolio value over 90 days.

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

Gotham Large Value  vs.  Swan Hedged Equity

Gotham Large Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gotham Large Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Swan Hedged Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Hedged Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Swan Hedged is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gotham Large and Swan Hedged

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

The idea behind Gotham Large Value and Swan Hedged Equity 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.