Correlation Between Gmo High and Steward International

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Can any of the company-specific risk be diversified away by investing in both Gmo High and Steward International 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 Steward International 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 Steward International Enhanced, you can compare the effects of market volatilities on Gmo High and Steward International 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 Steward International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Steward International.

Diversification Opportunities for Gmo High and Steward International

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between GMO and Steward is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Steward International Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward International 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 Steward International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward International has no effect on the direction of Gmo High i.e., Gmo High and Steward International go up and down completely randomly.

Pair Corralation between Gmo High and Steward International

Assuming the 90 days horizon Gmo High is expected to generate 1.9 times less return on investment than Steward International. But when comparing it to its historical volatility, Gmo High Yield is 4.69 times less risky than Steward International. It trades about 0.2 of its potential returns per unit of risk. Steward International Enhanced is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,488  in Steward International Enhanced on September 6, 2024 and sell it today you would earn a total of  98.00  from holding Steward International Enhanced or generate 3.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Gmo High Yield  vs.  Steward International Enhanced

 Performance 
       Timeline  
Gmo High Yield 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Gmo High Yield are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Steward International 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Steward International Enhanced are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Steward International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo High and Steward International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gmo High and Steward International

The main advantage of trading using opposite Gmo High and Steward International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Steward International 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 Steward International will offset losses from the drop in Steward International's long position.
The idea behind Gmo High Yield and Steward International Enhanced 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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