Correlation Between Gmo Resources and Clearbridge Energy

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

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

Diversification Opportunities for Gmo Resources and Clearbridge Energy

0.24

Correlation Coefficient

Gmo Resources  Clearbridge Energy

Modest diversification

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

Pair Corralation between Gmo Resources and Clearbridge Energy

Assuming the 90 days horizon Gmo Resources Fund is expected to under-perform the Clearbridge Energy. In addition to that, Gmo Resources is 1.12 times more volatile than Clearbridge Energy Mlp. It trades about -0.14 of its total potential returns per unit of risk. Clearbridge Energy Mlp is currently generating about -0.04 per unit of volatility. If you would invest  5,597  in Clearbridge Energy Mlp on December 20, 2024 and sell it today you would lose (76.00) from holding Clearbridge Energy Mlp or give up 1.36% of portfolio value over 90 days.

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

Gmo Resources Fund  vs.  Clearbridge Energy Mlp

Gmo Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gmo Resources Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Gmo Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Clearbridge Energy Mlp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Energy Mlp are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gmo Resources and Clearbridge Energy

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

The idea behind Gmo Resources Fund and Clearbridge Energy Mlp 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.