Correlation Between Gmo Small and Gmo Benchmark-free

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

Diversification Opportunities for Gmo Small and Gmo Benchmark-free

-0.56

Correlation Coefficient

Gmo Small  Gmo Benchmark-free

Excellent diversification

The 3 months correlation between Gmo and Gmo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Gmo Benchmark Free Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Benchmark Free 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 Gmo Benchmark-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Benchmark Free has no effect on the direction of Gmo Small i.e., Gmo Small and Gmo Benchmark-free go up and down completely randomly.

Pair Corralation between Gmo Small and Gmo Benchmark-free

Assuming the 90 days horizon Gmo Small Cap is expected to under-perform the Gmo Benchmark-free. In addition to that, Gmo Small is 2.43 times more volatile than Gmo Benchmark Free Allocation. It trades about -0.24 of its total potential returns per unit of risk. Gmo Benchmark Free Allocation is currently generating about 0.17 per unit of volatility. If you would invest  2,549  in Gmo Benchmark Free Allocation on November 29, 2024 and sell it today you would earn a total of  120.00  from holding Gmo Benchmark Free Allocation or generate 4.71% return on investment over 90 days.

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

Gmo Small Cap  vs.  Gmo Benchmark Free Allocation

Gmo Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gmo Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Gmo Benchmark Free

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Benchmark Free Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Gmo Benchmark-free 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 Small and Gmo Benchmark-free

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

The idea behind Gmo Small Cap and Gmo Benchmark Free Allocation 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.