Correlation Between Gmo Resources and Fundamental Large

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

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

Diversification Opportunities for Gmo Resources and Fundamental Large

-0.03

Correlation Coefficient

Gmo Resources  Fundamental Large

Good diversification

The 3 months correlation between Gmo and Fundamental is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Resources and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap and Gmo Resources 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 Resources are associated (or correlated) with Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Gmo Resources i.e., Gmo Resources and Fundamental Large go up and down completely randomly.

Pair Corralation between Gmo Resources and Fundamental Large

Assuming the 90 days horizon Gmo Resources is expected to under-perform the Fundamental Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Resources is 1.32 times less risky than Fundamental Large. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Fundamental Large Cap is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  6,033  in Fundamental Large Cap on September 27, 2024 and sell it today you would lose (595.00) from holding Fundamental Large Cap or give up 9.86% of portfolio value over 90 days.

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

Gmo Resources  vs.  Fundamental Large Cap

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fundamental Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundamental Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Gmo Resources and Fundamental Large

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

The idea behind Gmo Resources and Fundamental Large Cap 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.