Correlation Between Delaware Healthcare and Gmo International

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

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

Diversification Opportunities for Delaware Healthcare and Gmo International

0.74

Correlation Coefficient

Delaware Healthcare  Gmo International

Poor diversification

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

Pair Corralation between Delaware Healthcare and Gmo International

Assuming the 90 days horizon Delaware Healthcare is expected to generate 3.5 times less return on investment than Gmo International. But when comparing it to its historical volatility, Delaware Healthcare Fund is 1.07 times less risky than Gmo International. It trades about 0.1 of its potential returns per unit of risk. Gmo International Opportunistic is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,361  in Gmo International Opportunistic on December 20, 2024 and sell it today you would earn a total of  242.00  from holding Gmo International Opportunistic or generate 17.78% return on investment over 90 days.

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

Delaware Healthcare Fund  vs.  Gmo International Opportunisti

Delaware Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delaware Healthcare Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Delaware Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo International

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo International Opportunistic are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delaware Healthcare and Gmo International

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

The idea behind Delaware Healthcare Fund and Gmo International Opportunistic 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.