Correlation Between Gmo Asset and Direxion Monthly

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

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

Diversification Opportunities for Gmo Asset and Direxion Monthly

-0.64

Correlation Coefficient

Gmo Asset  Direxion Monthly

Excellent diversification

The 3 months correlation between Gmo and Direxion is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Asset Allocation and Direxion Monthly Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly Small and Gmo Asset 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 Asset Allocation are associated (or correlated) with Direxion Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Monthly Small has no effect on the direction of Gmo Asset i.e., Gmo Asset and Direxion Monthly go up and down completely randomly.

Pair Corralation between Gmo Asset and Direxion Monthly

Assuming the 90 days horizon Gmo Asset Allocation is expected to generate 0.46 times more return on investment than Direxion Monthly. However, Gmo Asset Allocation is 2.15 times less risky than Direxion Monthly. It trades about 0.1 of its potential returns per unit of risk. Direxion Monthly Small is currently generating about -0.1 per unit of risk. If you would invest  1,771  in Gmo Asset Allocation on December 29, 2024 and sell it today you would earn a total of  104.00  from holding Gmo Asset Allocation or generate 5.87% return on investment over 90 days.

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

Gmo Asset Allocation  vs.  Direxion Monthly Small

Gmo Asset Allocation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Asset Allocation are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion Monthly Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Monthly Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Gmo Asset and Direxion Monthly

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

The idea behind Gmo Asset Allocation and Direxion Monthly Small 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.