Correlation Between Gmo Core and F/m Investments

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

By analyzing existing cross correlation between Gmo E Plus and Fm Investments Large, you can compare the effects of market volatilities on Gmo Core and F/m Investments 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 Core with a short position of F/m Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Core and F/m Investments.

Diversification Opportunities for Gmo Core and F/m Investments

-0.77

Correlation Coefficient

Gmo Core  F/m Investments

Pay attention - limited upside

The 3 months correlation between Gmo and F/m is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Fm Investments Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fm Investments Large and Gmo Core 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 E Plus are associated (or correlated) with F/m Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fm Investments Large has no effect on the direction of Gmo Core i.e., Gmo Core and F/m Investments go up and down completely randomly.

Pair Corralation between Gmo Core and F/m Investments

Assuming the 90 days horizon Gmo E Plus is expected to generate 0.15 times more return on investment than F/m Investments. However, Gmo E Plus is 6.77 times less risky than F/m Investments. It trades about 0.16 of its potential returns per unit of risk. Fm Investments Large is currently generating about -0.15 per unit of risk. If you would invest  1,692  in Gmo E Plus on December 27, 2024 and sell it today you would earn a total of  47.00  from holding Gmo E Plus or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Gmo E Plus  vs.  Fm Investments Large

Gmo E Plus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo E Plus are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fm Investments Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fm Investments Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Gmo Core and F/m Investments

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

The idea behind Gmo E Plus and Fm Investments Large 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.