Correlation Between Swan Hedged and Gotham Large

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

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

Diversification Opportunities for Swan Hedged and Gotham Large

0.1

Correlation Coefficient

Swan Hedged  Gotham Large

Average diversification

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

Pair Corralation between Swan Hedged and Gotham Large

Given the investment horizon of 90 days Swan Hedged Equity is expected to generate 0.24 times more return on investment than Gotham Large. However, Swan Hedged Equity is 4.23 times less risky than Gotham Large. It trades about -0.12 of its potential returns per unit of risk. Gotham Large Value is currently generating about -0.24 per unit of risk. 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

Swan Hedged Equity  vs.  Gotham Large Value

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.

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.

Pair Trading with Swan Hedged and Gotham Large

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

The idea behind Swan Hedged Equity and Gotham Large Value 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 Transaction History module to view history of all your transactions and understand their impact on performance.