Correlation Between Stock Index and Eventide Gilead

Can any of the company-specific risk be diversified away by investing in both Stock Index and Eventide Gilead 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 Stock Index and Eventide Gilead into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Stock Index and Eventide Gilead

0.91

Correlation Coefficient

Stock Index  Eventide Gilead

Almost no diversification

The 3 months correlation between Stock and Eventide is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Stock Index Fund and Eventide Gilead Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Gilead and Stock Index 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 Stock Index Fund are associated (or correlated) with Eventide Gilead. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Gilead has no effect on the direction of Stock Index i.e., Stock Index and Eventide Gilead go up and down completely randomly.

Pair Corralation between Stock Index and Eventide Gilead

Assuming the 90 days horizon Stock Index Fund is expected to generate 0.6 times more return on investment than Eventide Gilead. However, Stock Index Fund is 1.66 times less risky than Eventide Gilead. It trades about 0.13 of its potential returns per unit of risk. Eventide Gilead Fund is currently generating about -0.01 per unit of risk. If you would invest  4,157  in Stock Index Fund on September 19, 2024 and sell it today you would earn a total of  215.00  from holding Stock Index Fund or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Stock Index Fund  vs.  Eventide Gilead Fund

Stock Index Fund

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stock Index Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Stock Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eventide Gilead

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with Stock Index and Eventide Gilead

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

The idea behind Stock Index Fund and Eventide Gilead Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.