Correlation Between Gmo Small and Sextant Growth

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

By analyzing existing cross correlation between Gmo Small Cap and Sextant Growth Fund, you can compare the effects of market volatilities on Gmo Small and Sextant Growth 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 Small with a short position of Sextant Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Sextant Growth.

Diversification Opportunities for Gmo Small and Sextant Growth

0.84

Correlation Coefficient

Gmo Small  Sextant Growth

Very poor diversification

The 3 months correlation between Gmo and Sextant is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Sextant Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant Growth and Gmo Small 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 Small Cap are associated (or correlated) with Sextant Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant Growth has no effect on the direction of Gmo Small i.e., Gmo Small and Sextant Growth go up and down completely randomly.

Pair Corralation between Gmo Small and Sextant Growth

Assuming the 90 days horizon Gmo Small Cap is expected to under-perform the Sextant Growth. In addition to that, Gmo Small is 1.24 times more volatile than Sextant Growth Fund. It trades about -0.03 of its total potential returns per unit of risk. Sextant Growth Fund is currently generating about 0.18 per unit of volatility. If you would invest  5,710  in Sextant Growth Fund on September 13, 2024 and sell it today you would earn a total of  170.00  from holding Sextant Growth Fund or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Gmo Small Cap  vs.  Sextant Growth Fund

Gmo Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sextant Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sextant Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sextant Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo Small and Sextant Growth

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

The idea behind Gmo Small Cap and Sextant Growth Fund 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.