Correlation Between Gmo Global and Europac International

Can any of the company-specific risk be diversified away by investing in both Gmo Global and Europac International 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 Europac International 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 Europac International Bond, you can compare the effects of market volatilities on Gmo Global and Europac International 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 Europac International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Europac International.

Diversification Opportunities for Gmo Global and Europac International

0.65

Correlation Coefficient

Gmo Global  Europac International

Poor diversification

The 3 months correlation between Gmo and Europac is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Europac International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europac International 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 Europac International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europac International has no effect on the direction of Gmo Global i.e., Gmo Global and Europac International go up and down completely randomly.

Pair Corralation between Gmo Global and Europac International

Assuming the 90 days horizon Gmo Global Equity is expected to generate 2.76 times more return on investment than Europac International. However, Gmo Global is 2.76 times more volatile than Europac International Bond. It trades about 0.03 of its potential returns per unit of risk. Europac International Bond is currently generating about -0.03 per unit of risk. If you would invest  2,653  in Gmo Global Equity on October 9, 2024 and sell it today you would earn a total of  172.00  from holding Gmo Global Equity or generate 6.48% return on investment over 90 days.

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

Gmo Global Equity  vs.  Europac International Bond

Gmo Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Global Equity 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.

Europac International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europac International Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Europac International 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 Global and Europac International

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

The idea behind Gmo Global Equity and Europac International Bond 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.