Correlation Between Gmo Small and Holbrook Income

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

Diversification Opportunities for Gmo Small and Holbrook Income

0.81

Correlation Coefficient

Gmo Small  Holbrook Income

Very poor diversification

The 3 months correlation between Gmo and Holbrook is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Holbrook Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holbrook Income 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 Holbrook Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holbrook Income has no effect on the direction of Gmo Small i.e., Gmo Small and Holbrook Income go up and down completely randomly.

Pair Corralation between Gmo Small and Holbrook Income

Assuming the 90 days horizon Gmo Small Cap is expected to generate 6.92 times more return on investment than Holbrook Income. However, Gmo Small is 6.92 times more volatile than Holbrook Income Fund. It trades about 0.01 of its potential returns per unit of risk. Holbrook Income Fund is currently generating about 0.05 per unit of risk. If you would invest  2,086  in Gmo Small Cap on October 8, 2024 and sell it today you would earn a total of  12.00  from holding Gmo Small Cap or generate 0.58% return on investment over 90 days.

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

Gmo Small Cap  vs.  Holbrook Income Fund

Gmo Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Holbrook Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holbrook Income Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Holbrook Income 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 Holbrook Income

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

The idea behind Gmo Small Cap and Holbrook Income 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.