Correlation Between Gmo International and Gmo Emerging

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

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

Diversification Opportunities for Gmo International and Gmo Emerging

0.3

Correlation Coefficient

Gmo International  Gmo Emerging

Weak diversification

The 3 months correlation between Gmo and Gmo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Equity and Gmo Emerging Ntry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Ntry and Gmo International 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 International Equity are associated (or correlated) with Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Ntry has no effect on the direction of Gmo International i.e., Gmo International and Gmo Emerging go up and down completely randomly.

Pair Corralation between Gmo International and Gmo Emerging

Assuming the 90 days horizon Gmo International is expected to generate 1.36 times less return on investment than Gmo Emerging. In addition to that, Gmo International is 2.25 times more volatile than Gmo Emerging Ntry. It trades about 0.11 of its total potential returns per unit of risk. Gmo Emerging Ntry is currently generating about 0.35 per unit of volatility. If you would invest  1,962  in Gmo Emerging Ntry on October 25, 2024 and sell it today you would earn a total of  39.00  from holding Gmo Emerging Ntry or generate 1.99% return on investment over 90 days.

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

Gmo International Equity  vs.  Gmo Emerging Ntry

Gmo International Equity

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo International Equity 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 International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Emerging Ntry

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Emerging Ntry are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Gmo Emerging 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 International and Gmo Emerging

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

The idea behind Gmo International Equity and Gmo Emerging Ntry 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.