Correlation Between Gmo Global and American Funds
Can any of the company-specific risk be diversified away by investing in both Gmo Global and American Funds 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 Global and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Global Equity and American Funds Fundamental, you can compare the effects of market volatilities on Gmo Global and American Funds 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 Global with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and American Funds.
Diversification Opportunities for Gmo Global and American Funds
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gmo and American is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and American Funds Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Funda and Gmo Global 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 Global Equity are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Funda has no effect on the direction of Gmo Global i.e., Gmo Global and American Funds go up and down completely randomly.
Pair Corralation between Gmo Global and American Funds
Assuming the 90 days horizon Gmo Global Equity is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Global Equity is 2.43 times less risky than American Funds. The mutual fund trades about -0.12 of its potential returns per unit of risk. The American Funds Fundamental is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 8,576 in American Funds Fundamental on September 26, 2024 and sell it today you would lose (302.00) from holding American Funds Fundamental or give up 3.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Gmo Global Equity vs. American Funds Fundamental
Performance |
Timeline |
Gmo Global Equity |
American Funds Funda |
Gmo Global and American Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gmo Global and American Funds
The main advantage of trading using opposite Gmo Global and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.Gmo Global vs. Gmo E Plus | Gmo Global vs. Gmo Trust | Gmo Global vs. Gmo Treasury Fund | Gmo Global vs. Gmo Trust |
American Funds vs. Gmo Global Equity | American Funds vs. Us Vector Equity | American Funds vs. Dreyfusnewton International Equity | American Funds vs. Ms Global Fixed |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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