Correlation Between Gmo Alternative and Zacks Small

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

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

Diversification Opportunities for Gmo Alternative and Zacks Small

-0.49

Correlation Coefficient

Gmo Alternative  Zacks Small

Very good diversification

The 3 months correlation between Gmo and Zacks is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation and Zacks Small Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacks Small Cap and Gmo Alternative 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 Gmo Alternative Allocation are associated (or correlated) with Zacks Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zacks Small Cap has no effect on the direction of Gmo Alternative i.e., Gmo Alternative and Zacks Small go up and down completely randomly.

Pair Corralation between Gmo Alternative and Zacks Small

Assuming the 90 days horizon Gmo Alternative Allocation is expected to under-perform the Zacks Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Alternative Allocation is 3.48 times less risky than Zacks Small. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Zacks Small Cap E is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,704  in Zacks Small Cap E on September 13, 2024 and sell it today you would earn a total of  245.00  from holding Zacks Small Cap E or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Gmo Alternative Allocation  vs.  Zacks Small Cap E

Gmo Alternative Allo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zacks Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zacks Small Cap E are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Zacks Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo Alternative and Zacks Small

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

The idea behind Gmo Alternative Allocation and Zacks Small Cap E 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.