Correlation Between Gmo International and Gmo E

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

By analyzing existing cross correlation between Gmo International Opportunistic and Gmo E Plus, you can compare the effects of market volatilities on Gmo International and Gmo E 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 International with a short position of Gmo E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo International and Gmo E.

Diversification Opportunities for Gmo International and Gmo E

0.93

Correlation Coefficient

Gmo International  Gmo E

Almost no diversification

The 3 months correlation between Gmo and Gmo is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Opportunisti and Gmo E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo E Plus and Gmo International 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 International Opportunistic are associated (or correlated) with Gmo E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo E Plus has no effect on the direction of Gmo International i.e., Gmo International and Gmo E go up and down completely randomly.

Pair Corralation between Gmo International and Gmo E

Assuming the 90 days horizon Gmo International Opportunistic is expected to generate 3.09 times more return on investment than Gmo E. However, Gmo International is 3.09 times more volatile than Gmo E Plus. It trades about 0.28 of its potential returns per unit of risk. Gmo E Plus is currently generating about 0.2 per unit of risk. If you would invest  1,374  in Gmo International Opportunistic on December 24, 2024 and sell it today you would earn a total of  205.00  from holding Gmo International Opportunistic or generate 14.92% return on investment over 90 days.

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

Gmo International Opportunisti  vs.  Gmo E Plus

Gmo International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo International Opportunistic are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo International showed solid returns over the last few months and may actually be approaching a breakup point.

Gmo E Plus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo E Plus are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo E 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 International and Gmo E

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

The idea behind Gmo International Opportunistic and Gmo E Plus 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.