Correlation Between GMO Internet and 78409VBL7

Can any of the company-specific risk be diversified away by investing in both GMO Internet and 78409VBL7 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 Internet and 78409VBL7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GMO Internet and SPGI 37 01 MAR 52, you can compare the effects of market volatilities on GMO Internet and 78409VBL7 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 Internet with a short position of 78409VBL7. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and 78409VBL7.

Diversification Opportunities for GMO Internet and 78409VBL7

0.53

Correlation Coefficient

GMO Internet  78409VBL7

Very weak diversification

The 3 months correlation between GMO and 78409VBL7 is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and SPGI 37 01 MAR 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPGI 37 01 and GMO Internet 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 Internet are associated (or correlated) with 78409VBL7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPGI 37 01 has no effect on the direction of GMO Internet i.e., GMO Internet and 78409VBL7 go up and down completely randomly.

Pair Corralation between GMO Internet and 78409VBL7

Assuming the 90 days horizon GMO Internet is expected to generate 1.39 times more return on investment than 78409VBL7. However, GMO Internet is 1.39 times more volatile than SPGI 37 01 MAR 52. It trades about 0.28 of its potential returns per unit of risk. SPGI 37 01 MAR 52 is currently generating about -0.09 per unit of risk. If you would invest  1,629  in GMO Internet on December 25, 2024 and sell it today you would earn a total of  556.00  from holding GMO Internet or generate 34.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.67%
Values	Daily Returns

GMO Internet  vs.  SPGI 37 01 MAR 52

GMO Internet

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

SPGI 37 01

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPGI 37 01 MAR 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SPGI 37 01 MAR 52 investors.

Pair Trading with GMO Internet and 78409VBL7

The main advantage of trading using opposite GMO Internet and 78409VBL7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet position performs unexpectedly, 78409VBL7 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 78409VBL7 will offset losses from the drop in 78409VBL7's long position.

The idea behind GMO Internet and SPGI 37 01 MAR 52 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.