Correlation Between Gmo High and Long Term
Can any of the company-specific risk be diversified away by investing in both Gmo High and Long Term 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 High and Long Term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and The Long Term, you can compare the effects of market volatilities on Gmo High and Long Term 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 High with a short position of Long Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Long Term.
Diversification Opportunities for Gmo High and Long Term
Very poor diversification
The 3 months correlation between Gmo and Long is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and The Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term and Gmo High 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 High Yield are associated (or correlated) with Long Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term has no effect on the direction of Gmo High i.e., Gmo High and Long Term go up and down completely randomly.
Pair Corralation between Gmo High and Long Term
Assuming the 90 days horizon Gmo High is expected to generate 11.12 times less return on investment than Long Term. But when comparing it to its historical volatility, Gmo High Yield is 6.64 times less risky than Long Term. It trades about 0.19 of its potential returns per unit of risk. The Long Term is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 3,475 in The Long Term on November 22, 2024 and sell it today you would earn a total of 257.00 from holding The Long Term or generate 7.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Gmo High Yield vs. The Long Term
Performance |
Timeline |
Gmo High Yield |
Long Term |
Gmo High and Long Term Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gmo High and Long Term
The main advantage of trading using opposite Gmo High and Long Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Long Term 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 Long Term will offset losses from the drop in Long Term's long position.Gmo High vs. Global Technology Portfolio | ||
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Check out your portfolio center.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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