Correlation Between Gmo Global and Gmo Quality

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

By analyzing existing cross correlation between Gmo Global Asset and Gmo Quality Fund, you can compare the effects of market volatilities on Gmo Global and Gmo Quality 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 Global with a short position of Gmo Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Gmo Quality.

Diversification Opportunities for Gmo Global and Gmo Quality

0.94

Correlation Coefficient

Gmo Global  Gmo Quality

Almost no diversification

The 3 months correlation between Gmo and Gmo is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Asset and Gmo Quality Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Quality Fund and Gmo Global 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 Global Asset are associated (or correlated) with Gmo Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Quality Fund has no effect on the direction of Gmo Global i.e., Gmo Global and Gmo Quality go up and down completely randomly.

Pair Corralation between Gmo Global and Gmo Quality

Assuming the 90 days horizon Gmo Global is expected to generate 1.57 times less return on investment than Gmo Quality. But when comparing it to its historical volatility, Gmo Global Asset is 1.28 times less risky than Gmo Quality. It trades about 0.11 of its potential returns per unit of risk. Gmo Quality Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,279  in Gmo Quality Fund on November 19, 2024 and sell it today you would earn a total of  163.00  from holding Gmo Quality Fund or generate 4.97% return on investment over 90 days.

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

Gmo Global Asset  vs.  Gmo Quality Fund

Gmo Global Asset

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Global Asset are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Quality Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Quality Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Quality 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 Global and Gmo Quality

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

The idea behind Gmo Global Asset and Gmo Quality Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.