Correlation Between Gmo Global and Schwab Balanced

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Can any of the company-specific risk be diversified away by investing in both Gmo Global and Schwab Balanced 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 Global and Schwab Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Global Equity and Schwab Balanced Fund, you can compare the effects of market volatilities on Gmo Global and Schwab Balanced 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 Global with a short position of Schwab Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Schwab Balanced.

Diversification Opportunities for Gmo Global and Schwab Balanced

GmoSchwabDiversified AwayGmoSchwabDiversified Away100%
0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Gmo and Schwab is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Schwab Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Balanced and Gmo Global 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 Global Equity are associated (or correlated) with Schwab Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Balanced has no effect on the direction of Gmo Global i.e., Gmo Global and Schwab Balanced go up and down completely randomly.

Pair Corralation between Gmo Global and Schwab Balanced

Assuming the 90 days horizon Gmo Global Equity is expected to generate 1.76 times more return on investment than Schwab Balanced. However, Gmo Global is 1.76 times more volatile than Schwab Balanced Fund. It trades about 0.06 of its potential returns per unit of risk. Schwab Balanced Fund is currently generating about -0.01 per unit of risk. If you would invest  2,848  in Gmo Global Equity on November 22, 2024 and sell it today you would earn a total of  120.00  from holding Gmo Global Equity or generate 4.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.31%
ValuesDaily Returns

Gmo Global Equity  vs.  Schwab Balanced Fund

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -6-4-202
JavaScript chart by amCharts 3.21.15GAAUX SWOBX
       Timeline  
Gmo Global Equity 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Global Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2828.52929.530
Schwab Balanced 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Schwab Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Schwab Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb16.616.81717.217.417.617.8

Gmo Global and Schwab Balanced Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.77-2.83-1.88-0.93-0.010.951.932.923.94.88 0.20.40.60.8
JavaScript chart by amCharts 3.21.15GAAUX SWOBX
       Returns  

Pair Trading with Gmo Global and Schwab Balanced

The main advantage of trading using opposite Gmo Global and Schwab Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, Schwab Balanced 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 Schwab Balanced will offset losses from the drop in Schwab Balanced's long position.
The idea behind Gmo Global Equity and Schwab Balanced 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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