Correlation Between Gmo Global and Balanced Fund

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

Diversification Opportunities for Gmo Global and Balanced Fund

0.25

Correlation Coefficient

Gmo Global  Balanced Fund

Modest diversification

The 3 months correlation between Gmo and Balanced is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Balanced Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Retail 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Retail has no effect on the direction of Gmo Global i.e., Gmo Global and Balanced Fund go up and down completely randomly.

Pair Corralation between Gmo Global and Balanced Fund

Assuming the 90 days horizon Gmo Global Equity is expected to generate 1.07 times more return on investment than Balanced Fund. However, Gmo Global is 1.07 times more volatile than Balanced Fund Retail. It trades about 0.1 of its potential returns per unit of risk. Balanced Fund Retail is currently generating about -0.06 per unit of risk. If you would invest  2,813  in Gmo Global Equity on December 28, 2024 and sell it today you would earn a total of  124.00  from holding Gmo Global Equity or generate 4.41% return on investment over 90 days.

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

Gmo Global Equity  vs.  Balanced Fund Retail

Gmo Global Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Global Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Gmo Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Fund Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balanced Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Balanced Fund 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 Balanced Fund

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

The idea behind Gmo Global Equity and Balanced Fund Retail 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.