Correlation Between Gmo Alternative and Trillium Small/mid

Can any of the company-specific risk be diversified away by investing in both Gmo Alternative and Trillium Small/mid 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 Trillium Small/mid 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 Trillium Smallmid Cap, you can compare the effects of market volatilities on Gmo Alternative and Trillium Small/mid 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 Trillium Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Alternative and Trillium Small/mid.

Diversification Opportunities for Gmo Alternative and Trillium Small/mid

-0.61

Correlation Coefficient

Gmo Alternative  Trillium Small/mid

Excellent diversification

The 3 months correlation between Gmo and Trillium is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation and Trillium Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trillium Smallmid 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 Trillium Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trillium Smallmid Cap has no effect on the direction of Gmo Alternative i.e., Gmo Alternative and Trillium Small/mid go up and down completely randomly.

Pair Corralation between Gmo Alternative and Trillium Small/mid

Assuming the 90 days horizon Gmo Alternative Allocation is expected to under-perform the Trillium Small/mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Alternative Allocation is 2.28 times less risky than Trillium Small/mid. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Trillium Smallmid Cap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,551  in Trillium Smallmid Cap on September 3, 2024 and sell it today you would earn a total of  161.00  from holding Trillium Smallmid Cap or generate 10.38% return on investment over 90 days.

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

Gmo Alternative Allocation  vs.  Trillium Smallmid Cap

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 forward-looking signals, Gmo Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Trillium Smallmid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trillium Smallmid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Trillium Small/mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo Alternative and Trillium Small/mid

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

The idea behind Gmo Alternative Allocation and Trillium Smallmid Cap 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.