Correlation Between Adams Diversified and Gmo Us

Can any of the company-specific risk be diversified away by investing in both Adams Diversified and Gmo Us 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 Adams Diversified and Gmo Us into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adams Diversified Equity and GMO Small Cap, you can compare the effects of market volatilities on Adams Diversified and Gmo Us 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 Adams Diversified with a short position of Gmo Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and Gmo Us.

Diversification Opportunities for Adams Diversified and Gmo Us

0.82

Correlation Coefficient

Adams Diversified  Gmo Us

Very poor diversification

The 3 months correlation between Adams and Gmo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and GMO Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap and Adams Diversified 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 Adams Diversified Equity are associated (or correlated) with Gmo Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Adams Diversified i.e., Adams Diversified and Gmo Us go up and down completely randomly.

Pair Corralation between Adams Diversified and Gmo Us

Considering the 90-day investment horizon Adams Diversified Equity is expected to generate 0.83 times more return on investment than Gmo Us. However, Adams Diversified Equity is 1.21 times less risky than Gmo Us. It trades about -0.08 of its potential returns per unit of risk. GMO Small Cap is currently generating about -0.09 per unit of risk. If you would invest  2,022  in Adams Diversified Equity on December 26, 2024 and sell it today you would lose (94.00) from holding Adams Diversified Equity or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Adams Diversified Equity  vs.  GMO Small Cap

Adams Diversified Equity

Risk-Adjusted Performance

Very Weak

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

Gmo Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMO Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Adams Diversified and Gmo Us

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

The idea behind Adams Diversified Equity and GMO Small Cap 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.