Correlation Between Gmo Us and Ridgeworth Ceredex

Can any of the company-specific risk be diversified away by investing in both Gmo Us and Ridgeworth Ceredex 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 Us and Ridgeworth Ceredex 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 Ridgeworth Ceredex Mid Cap, you can compare the effects of market volatilities on Gmo Us and Ridgeworth Ceredex 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 Us with a short position of Ridgeworth Ceredex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Us and Ridgeworth Ceredex.

Diversification Opportunities for Gmo Us and Ridgeworth Ceredex

0.85

Correlation Coefficient

Gmo Us  Ridgeworth Ceredex

Very poor diversification

The 3 months correlation between Gmo and Ridgeworth is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GMO Small Cap and Ridgeworth Ceredex Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgeworth Ceredex Mid and Gmo Us 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 Ridgeworth Ceredex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgeworth Ceredex Mid has no effect on the direction of Gmo Us i.e., Gmo Us and Ridgeworth Ceredex go up and down completely randomly.

Pair Corralation between Gmo Us and Ridgeworth Ceredex

Assuming the 90 days horizon GMO Small Cap is expected to under-perform the Ridgeworth Ceredex. In addition to that, Gmo Us is 1.02 times more volatile than Ridgeworth Ceredex Mid Cap. It trades about -0.1 of its total potential returns per unit of risk. Ridgeworth Ceredex Mid Cap is currently generating about -0.07 per unit of volatility. If you would invest  1,168  in Ridgeworth Ceredex Mid Cap on December 30, 2024 and sell it today you would lose (61.00) from holding Ridgeworth Ceredex Mid Cap or give up 5.22% of portfolio value over 90 days.

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

GMO Small Cap  vs.  Ridgeworth Ceredex Mid Cap

Gmo Small Cap

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ridgeworth Ceredex Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ridgeworth Ceredex Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ridgeworth Ceredex 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 Us and Ridgeworth Ceredex

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

The idea behind GMO Small Cap and Ridgeworth Ceredex Mid Cap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.