Correlation Between Gnma Fund and Rational Defensive

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

By analyzing existing cross correlation between Gnma Fund Institutional and Rational Defensive Growth, you can compare the effects of market volatilities on Gnma Fund and Rational Defensive 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 Rational Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gnma Fund and Rational Defensive.

Diversification Opportunities for Gnma Fund and Rational Defensive

-0.48

Correlation Coefficient

Gnma Fund  Rational Defensive

Very good diversification

The 3 months correlation between Gnma and Rational is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gnma Fund Institutional and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth 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 Institutional are associated (or correlated) with Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Gnma Fund i.e., Gnma Fund and Rational Defensive go up and down completely randomly.

Pair Corralation between Gnma Fund and Rational Defensive

Assuming the 90 days horizon Gnma Fund Institutional is expected to generate 0.26 times more return on investment than Rational Defensive. However, Gnma Fund Institutional is 3.78 times less risky than Rational Defensive. It trades about 0.12 of its potential returns per unit of risk. Rational Defensive Growth is currently generating about -0.07 per unit of risk. If you would invest  909.00  in Gnma Fund Institutional on December 28, 2024 and sell it today you would earn a total of  23.00  from holding Gnma Fund Institutional or generate 2.53% return on investment over 90 days.

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

Gnma Fund Institutional  vs.  Rational Defensive Growth

Gnma Fund Institutional

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gnma Fund Institutional are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Gnma Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rational Defensive Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Defensive Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rational Defensive 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 Rational Defensive

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

The idea behind Gnma Fund Institutional and Rational Defensive Growth 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.