Correlation Between Gmo High and Semiconductor Ultrasector

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

By analyzing existing cross correlation between Gmo High Yield and Semiconductor Ultrasector Profund, you can compare the effects of market volatilities on Gmo High and Semiconductor 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 High with a short position of Semiconductor Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Semiconductor Ultrasector.

Diversification Opportunities for Gmo High and Semiconductor Ultrasector

0.28

Correlation Coefficient

Gmo High  Semiconductor Ultrasector

Modest diversification

The 3 months correlation between Gmo and Semiconductor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector and Gmo High 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 High Yield are associated (or correlated) with Semiconductor Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Ultrasector has no effect on the direction of Gmo High i.e., Gmo High and Semiconductor Ultrasector go up and down completely randomly.

Pair Corralation between Gmo High and Semiconductor Ultrasector

Assuming the 90 days horizon Gmo High Yield is expected to generate 0.26 times more return on investment than Semiconductor Ultrasector. However, Gmo High Yield is 3.88 times less risky than Semiconductor Ultrasector. It trades about -0.12 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about -0.04 per unit of risk. If you would invest  1,793  in Gmo High Yield on October 4, 2024 and sell it today you would lose (129.00) from holding Gmo High Yield or give up 7.19% of portfolio value over 90 days.

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

Gmo High Yield  vs.  Semiconductor Ultrasector Prof

Gmo High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo High Yield 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.

Semiconductor Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semiconductor Ultrasector Profund 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 High and Semiconductor Ultrasector

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

The idea behind Gmo High Yield and Semiconductor 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.