Correlation Between Gnma Fund and Fundamental Indexplus

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

By analyzing existing cross correlation between Gnma Fund A and Fundamental Indexplus Tr, you can compare the effects of market volatilities on Gnma Fund and Fundamental Indexplus 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 Gnma Fund with a short position of Fundamental Indexplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gnma Fund and Fundamental Indexplus.

Diversification Opportunities for Gnma Fund and Fundamental Indexplus

-0.23

Correlation Coefficient

Gnma Fund  Fundamental Indexplus

Very good diversification

The 3 months correlation between Gnma and Fundamental is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Gnma Fund A and Fundamental Indexplus Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Indexplus and Gnma Fund 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 Gnma Fund A are associated (or correlated) with Fundamental Indexplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Indexplus has no effect on the direction of Gnma Fund i.e., Gnma Fund and Fundamental Indexplus go up and down completely randomly.

Pair Corralation between Gnma Fund and Fundamental Indexplus

Assuming the 90 days horizon Gnma Fund A is expected to under-perform the Fundamental Indexplus. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gnma Fund A is 2.59 times less risky than Fundamental Indexplus. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Fundamental Indexplus Tr is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,754  in Fundamental Indexplus Tr on September 16, 2024 and sell it today you would earn a total of  46.00  from holding Fundamental Indexplus Tr or generate 2.62% return on investment over 90 days.

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

Gnma Fund A  vs.  Fundamental Indexplus Tr

Gnma Fund A

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fundamental Indexplus

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Gnma Fund and Fundamental Indexplus

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

The idea behind Gnma Fund A and Fundamental Indexplus Tr 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.