Correlation Between Vest Large and Gmo High

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

By analyzing existing cross correlation between Vest Large Cap and Gmo High Yield, you can compare the effects of market volatilities on Vest Large and Gmo High 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 Vest Large with a short position of Gmo High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vest Large and Gmo High.

Diversification Opportunities for Vest Large and Gmo High

-0.87

Correlation Coefficient

Vest Large  Gmo High

Pay attention - limited upside

The 3 months correlation between Vest and Gmo is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vest Large Cap and Gmo High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo High Yield and Vest Large 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 Vest Large Cap are associated (or correlated) with Gmo High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo High Yield has no effect on the direction of Vest Large i.e., Vest Large and Gmo High go up and down completely randomly.

Pair Corralation between Vest Large and Gmo High

Assuming the 90 days horizon Vest Large Cap is expected to generate 10.13 times more return on investment than Gmo High. However, Vest Large is 10.13 times more volatile than Gmo High Yield. It trades about 0.12 of its potential returns per unit of risk. Gmo High Yield is currently generating about -0.17 per unit of risk. If you would invest  766.00  in Vest Large Cap on October 11, 2024 and sell it today you would earn a total of  37.00  from holding Vest Large Cap or generate 4.83% return on investment over 90 days.

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

Vest Large Cap  vs.  Gmo High Yield

Vest Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vest Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vest Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo High Yield

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo High Yield are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vest Large and Gmo High

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

The idea behind Vest Large Cap and Gmo High Yield 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.