Correlation Between Ab Global and Gmo Us

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

By analyzing existing cross correlation between Ab Global Bond and Gmo Opportunistic Value, you can compare the effects of market volatilities on Ab Global 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 Ab Global with a short position of Gmo Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Gmo Us.

Diversification Opportunities for Ab Global and Gmo Us

0.3

Correlation Coefficient

Ab Global  Gmo Us

Weak diversification

The 3 months correlation between ANAZX and GMO is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Bond and Gmo Opportunistic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Opportunistic Value and Ab Global 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 Ab Global Bond 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 Opportunistic Value has no effect on the direction of Ab Global i.e., Ab Global and Gmo Us go up and down completely randomly.

Pair Corralation between Ab Global and Gmo Us

Assuming the 90 days horizon Ab Global is expected to generate 10.94 times less return on investment than Gmo Us. But when comparing it to its historical volatility, Ab Global Bond is 2.62 times less risky than Gmo Us. It trades about 0.06 of its potential returns per unit of risk. Gmo Opportunistic Value is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,170  in Gmo Opportunistic Value on October 26, 2024 and sell it today you would earn a total of  71.00  from holding Gmo Opportunistic Value or generate 3.27% return on investment over 90 days.

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

Ab Global Bond  vs.  Gmo Opportunistic Value

Ab Global Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gmo Opportunistic Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ab Global and Gmo Us

The main advantage of trading using opposite Ab Global and Gmo Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global 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 Ab Global Bond and Gmo Opportunistic Value 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.