Correlation Between Fundamental Indexplus and Gnma Fund

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

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

Diversification Opportunities for Fundamental Indexplus and Gnma Fund

0.73

Correlation Coefficient

Fundamental Indexplus  Gnma Fund

Poor diversification

The 3 months correlation between Fundamental and Gnma is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Indexplus Tr and Gnma Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnma Fund A and Fundamental Indexplus 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 Fundamental Indexplus Tr are associated (or correlated) with Gnma Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnma Fund A has no effect on the direction of Fundamental Indexplus i.e., Fundamental Indexplus and Gnma Fund go up and down completely randomly.

Pair Corralation between Fundamental Indexplus and Gnma Fund

Assuming the 90 days horizon Fundamental Indexplus is expected to generate 33.36 times less return on investment than Gnma Fund. In addition to that, Fundamental Indexplus is 2.25 times more volatile than Gnma Fund A. It trades about 0.0 of its total potential returns per unit of risk. Gnma Fund A is currently generating about 0.27 per unit of volatility. If you would invest  921.00  in Gnma Fund A on December 5, 2024 and sell it today you would earn a total of  19.00  from holding Gnma Fund A or generate 2.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Fundamental Indexplus Tr  vs.  Gnma Fund A

Fundamental Indexplus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Indexplus Tr has generated negative risk-adjusted returns adding no value to fund investors. 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.

Gnma Fund A

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gnma Fund A are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Fundamental Indexplus and Gnma Fund

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

The idea behind Fundamental Indexplus Tr and Gnma Fund A 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.