Correlation Between Gmo Resources and Federated Strategic

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

By analyzing existing cross correlation between Gmo Resources and Federated Strategic Value, you can compare the effects of market volatilities on Gmo Resources and Federated Strategic 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 Federated Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Resources and Federated Strategic.

Diversification Opportunities for Gmo Resources and Federated Strategic

0.74

Correlation Coefficient

Gmo Resources  Federated Strategic

Poor diversification

The 3 months correlation between Gmo and Federated is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Resources and Federated Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic Value 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 Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic Value has no effect on the direction of Gmo Resources i.e., Gmo Resources and Federated Strategic go up and down completely randomly.

Pair Corralation between Gmo Resources and Federated Strategic

Assuming the 90 days horizon Gmo Resources is expected to under-perform the Federated Strategic. In addition to that, Gmo Resources is 1.83 times more volatile than Federated Strategic Value. It trades about -0.04 of its total potential returns per unit of risk. Federated Strategic Value is currently generating about 0.05 per unit of volatility. If you would invest  512.00  in Federated Strategic Value on October 4, 2024 and sell it today you would earn a total of  75.00  from holding Federated Strategic Value or generate 14.65% return on investment over 90 days.

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

Gmo Resources  vs.  Federated Strategic Value

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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Federated Strategic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Strategic Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Strategic 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 Resources and Federated Strategic

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

The idea behind Gmo Resources and Federated Strategic Value 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.