Correlation Between Moderately Aggressive and Gateway Fund

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

By analyzing existing cross correlation between Moderately Aggressive Balanced and Gateway Fund Class, you can compare the effects of market volatilities on Moderately Aggressive and Gateway 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 Moderately Aggressive with a short position of Gateway Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderately Aggressive and Gateway Fund.

Diversification Opportunities for Moderately Aggressive and Gateway Fund

0.63

Correlation Coefficient

Moderately Aggressive  Gateway Fund

Poor diversification

The 3 months correlation between Moderately and Gateway is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Gateway Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Fund Class and Moderately Aggressive 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 Moderately Aggressive Balanced are associated (or correlated) with Gateway Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Fund Class has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Gateway Fund go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Gateway Fund

Assuming the 90 days horizon Moderately Aggressive is expected to generate 1.4 times less return on investment than Gateway Fund. In addition to that, Moderately Aggressive is 1.21 times more volatile than Gateway Fund Class. It trades about 0.07 of its total potential returns per unit of risk. Gateway Fund Class is currently generating about 0.11 per unit of volatility. If you would invest  4,299  in Gateway Fund Class on October 22, 2024 and sell it today you would earn a total of  329.00  from holding Gateway Fund Class or generate 7.65% return on investment over 90 days.

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

Moderately Aggressive Balanced  vs.  Gateway Fund Class

Moderately Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gateway Fund Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gateway Fund Class are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Gateway 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 Moderately Aggressive and Gateway Fund

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

The idea behind Moderately Aggressive Balanced and Gateway Fund Class 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.