Correlation Between Gmo Trust and Materials Portfolio

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

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

Diversification Opportunities for Gmo Trust and Materials Portfolio

0.73

Correlation Coefficient

Gmo Trust  Materials Portfolio

Poor diversification

The 3 months correlation between Gmo and Materials is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Trust and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Gmo Trust 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 Trust are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Gmo Trust i.e., Gmo Trust and Materials Portfolio go up and down completely randomly.

Pair Corralation between Gmo Trust and Materials Portfolio

Assuming the 90 days horizon Gmo Trust is expected to generate 1.04 times more return on investment than Materials Portfolio. However, Gmo Trust is 1.04 times more volatile than Materials Portfolio Fidelity. It trades about -0.12 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about -0.23 per unit of risk. If you would invest  2,097  in Gmo Trust on October 9, 2024 and sell it today you would lose (205.00) from holding Gmo Trust or give up 9.78% of portfolio value over 90 days.

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

Gmo Trust   vs.  Materials Portfolio Fidelity

Gmo Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Materials Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Portfolio Fidelity 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Gmo Trust and Materials Portfolio

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

The idea behind Gmo Trust and Materials Portfolio Fidelity 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.