Correlation Between Gmo Core and Matrix Advisors

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

Diversification Opportunities for Gmo Core and Matrix Advisors

0.31

Correlation Coefficient

Gmo Core  Matrix Advisors

Weak diversification

The 3 months correlation between Gmo and Matrix is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Matrix Advisors Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix Advisors Value 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 Matrix Advisors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix Advisors Value has no effect on the direction of Gmo Core i.e., Gmo Core and Matrix Advisors go up and down completely randomly.

Pair Corralation between Gmo Core and Matrix Advisors

Assuming the 90 days horizon Gmo Core is expected to generate 5.08 times less return on investment than Matrix Advisors. But when comparing it to its historical volatility, Gmo E Plus is 2.18 times less risky than Matrix Advisors. It trades about 0.04 of its potential returns per unit of risk. Matrix Advisors Value is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,006  in Matrix Advisors Value on December 4, 2024 and sell it today you would earn a total of  3,258  from holding Matrix Advisors Value or generate 46.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.99%
Values	Daily Returns

Gmo E Plus  vs.  Matrix Advisors Value

Gmo E Plus

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo E Plus are ranked lower than 4 (%) 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.

Matrix Advisors Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matrix Advisors Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Matrix Advisors 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 Core and Matrix Advisors

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

The idea behind Gmo E Plus and Matrix Advisors Value 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.