Correlation Between Gmo Resources and Technology Ultrasector

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

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

Diversification Opportunities for Gmo Resources and Technology Ultrasector

-0.46

Correlation Coefficient

Gmo Resources  Technology Ultrasector

Very good diversification

The 3 months correlation between Gmo and Technology is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Resources and Technology Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Ultrasector 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 Technology Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Ultrasector has no effect on the direction of Gmo Resources i.e., Gmo Resources and Technology Ultrasector go up and down completely randomly.

Pair Corralation between Gmo Resources and Technology Ultrasector

Assuming the 90 days horizon Gmo Resources is expected to under-perform the Technology Ultrasector. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Resources is 1.45 times less risky than Technology Ultrasector. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Technology Ultrasector Profund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,653  in Technology Ultrasector Profund on September 21, 2024 and sell it today you would earn a total of  2,364  from holding Technology Ultrasector Profund or generate 143.01% return on investment over 90 days.

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

Gmo Resources  vs.  Technology Ultrasector Profund

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 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.

Technology Ultrasector

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Ultrasector Profund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Technology Ultrasector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo Resources and Technology Ultrasector

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

The idea behind Gmo Resources and Technology Ultrasector Profund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..