Correlation Between Gmo Trust and Victory Global

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

By analyzing existing cross correlation between Gmo Trust and Victory Global Natural, you can compare the effects of market volatilities on Gmo Trust and Victory Global 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 Victory Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Trust and Victory Global.

Diversification Opportunities for Gmo Trust and Victory Global

0.87

Correlation Coefficient

Gmo Trust  Victory Global

Very poor diversification

The 3 months correlation between GMO and Victory is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Trust and Victory Global Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Global Natural 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 Victory Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Global Natural has no effect on the direction of Gmo Trust i.e., Gmo Trust and Victory Global go up and down completely randomly.

Pair Corralation between Gmo Trust and Victory Global

Assuming the 90 days horizon Gmo Trust is expected to under-perform the Victory Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Trust is 1.1 times less risky than Victory Global. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Victory Global Natural is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,709  in Victory Global Natural on December 29, 2024 and sell it today you would lose (96.00) from holding Victory Global Natural or give up 3.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Gmo Trust   vs.  Victory Global Natural

Gmo Trust

Risk-Adjusted Performance

Very Weak

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

Victory Global Natural

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Gmo Trust and Victory Global Natural 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.