Correlation Between Gmo Global and Dreyfusnewton International

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

Diversification Opportunities for Gmo Global and Dreyfusnewton International

0.72

Correlation Coefficient

Gmo Global  Dreyfusnewton International

Poor diversification

The 3 months correlation between Gmo and Dreyfusnewton is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Dreyfusnewton International Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfusnewton 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 Dreyfusnewton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfusnewton International has no effect on the direction of Gmo Global i.e., Gmo Global and Dreyfusnewton International go up and down completely randomly.

Pair Corralation between Gmo Global and Dreyfusnewton International

Assuming the 90 days horizon Gmo Global is expected to generate 1.41 times less return on investment than Dreyfusnewton International. But when comparing it to its historical volatility, Gmo Global Equity is 1.5 times less risky than Dreyfusnewton International. It trades about 0.21 of its potential returns per unit of risk. Dreyfusnewton International Equity is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,143  in Dreyfusnewton International Equity on September 16, 2024 and sell it today you would earn a total of  54.00  from holding Dreyfusnewton International Equity or generate 2.52% 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.  Dreyfusnewton International Eq

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 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.

Dreyfusnewton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfusnewton International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dreyfusnewton 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 Dreyfusnewton International

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

The idea behind Gmo Global Equity and Dreyfusnewton International Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.