Correlation Between Gmo Alternative and The Us

Can any of the company-specific risk be diversified away by investing in both Gmo Alternative and The Us 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 The Us 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 The Government Fixed, you can compare the effects of market volatilities on Gmo Alternative and The Us 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 The Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Alternative and The Us.

Diversification Opportunities for Gmo Alternative and The Us

0.66

Correlation Coefficient

Gmo Alternative  The Us

Poor diversification

The 3 months correlation between Gmo and The is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation and The Government Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Fixed 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 The Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Fixed has no effect on the direction of Gmo Alternative i.e., Gmo Alternative and The Us go up and down completely randomly.

Pair Corralation between Gmo Alternative and The Us

Assuming the 90 days horizon Gmo Alternative Allocation is expected to generate 1.95 times more return on investment than The Us. However, Gmo Alternative is 1.95 times more volatile than The Government Fixed. It trades about 0.18 of its potential returns per unit of risk. The Government Fixed is currently generating about 0.09 per unit of risk. If you would invest  1,715  in Gmo Alternative Allocation on December 18, 2024 and sell it today you would earn a total of  120.00  from holding Gmo Alternative Allocation or generate 7.0% return on investment over 90 days.

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

Gmo Alternative Allocation  vs.  The Government Fixed

Gmo Alternative Allo

Risk-Adjusted Performance

Good

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

Government Fixed

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Government Fixed are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gmo Alternative and The Us

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

The idea behind Gmo Alternative Allocation and The Government Fixed 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.