Correlation Between Gateway Fund and Princeton Premium

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

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

Diversification Opportunities for Gateway Fund and Princeton Premium

0.74

Correlation Coefficient

Gateway Fund  Princeton Premium

Poor diversification

The 3 months correlation between Gateway and Princeton is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gateway Fund Class and Princeton Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Premium and Gateway 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 Gateway Fund Class are associated (or correlated) with Princeton Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Premium has no effect on the direction of Gateway Fund i.e., Gateway Fund and Princeton Premium go up and down completely randomly.

Pair Corralation between Gateway Fund and Princeton Premium

Assuming the 90 days horizon Gateway Fund Class is expected to generate 1.95 times more return on investment than Princeton Premium. However, Gateway Fund is 1.95 times more volatile than Princeton Premium. It trades about 0.22 of its potential returns per unit of risk. Princeton Premium is currently generating about 0.03 per unit of risk. If you would invest  4,483  in Gateway Fund Class on September 16, 2024 and sell it today you would earn a total of  251.00  from holding Gateway Fund Class or generate 5.6% return on investment over 90 days.

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

Gateway Fund Class  vs.  Princeton Premium

Gateway Fund Class

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gateway Fund Class are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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.

Princeton Premium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Premium are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Princeton Premium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gateway Fund and Princeton Premium

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

The idea behind Gateway Fund Class and Princeton Premium 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.