Correlation Between Gmo Small and Cargile Fund

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

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

Diversification Opportunities for Gmo Small and Cargile Fund

0.74

Correlation Coefficient

Gmo Small  Cargile Fund

Poor diversification

The 3 months correlation between Gmo and Cargile is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Cargile Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargile Fund and Gmo Small 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 Small Cap are associated (or correlated) with Cargile Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargile Fund has no effect on the direction of Gmo Small i.e., Gmo Small and Cargile Fund go up and down completely randomly.

Pair Corralation between Gmo Small and Cargile Fund

Assuming the 90 days horizon Gmo Small Cap is expected to generate 2.14 times more return on investment than Cargile Fund. However, Gmo Small is 2.14 times more volatile than Cargile Fund. It trades about 0.04 of its potential returns per unit of risk. Cargile Fund is currently generating about 0.01 per unit of risk. If you would invest  1,668  in Gmo Small Cap on October 4, 2024 and sell it today you would earn a total of  418.00  from holding Gmo Small Cap or generate 25.06% return on investment over 90 days.

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

Gmo Small Cap  vs.  Cargile Fund

Gmo Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cargile Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cargile Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Cargile Fund 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 Small and Cargile Fund

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

The idea behind Gmo Small Cap and Cargile 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.