Correlation Between The National and Gmo Implementation

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

By analyzing existing cross correlation between The National Tax Free and Gmo Implementation Fund, you can compare the effects of market volatilities on The National and Gmo Implementation 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 The National with a short position of Gmo Implementation. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Gmo Implementation.

Diversification Opportunities for The National and Gmo Implementation

0.64

Correlation Coefficient

The National  Gmo Implementation

Poor diversification

The 3 months correlation between The and Gmo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Gmo Implementation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Implementation and The National 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 The National Tax Free are associated (or correlated) with Gmo Implementation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Implementation has no effect on the direction of The National i.e., The National and Gmo Implementation go up and down completely randomly.

Pair Corralation between The National and Gmo Implementation

Assuming the 90 days horizon The National is expected to generate 46.95 times less return on investment than Gmo Implementation. But when comparing it to its historical volatility, The National Tax Free is 2.61 times less risky than Gmo Implementation. It trades about 0.01 of its potential returns per unit of risk. Gmo Implementation Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,276  in Gmo Implementation Fund on December 27, 2024 and sell it today you would earn a total of  73.00  from holding Gmo Implementation Fund or generate 5.72% return on investment over 90 days.

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

The National Tax Free  vs.  Gmo Implementation Fund

National Tax

Risk-Adjusted Performance

Very Weak

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

Gmo Implementation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Implementation Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo Implementation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The National and Gmo Implementation

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

The idea behind The National Tax Free and Gmo Implementation 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.