Correlation Between Gmo Core and Sit U

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

Diversification Opportunities for Gmo Core and Sit U

0.99

Correlation Coefficient

Gmo Core  Sit U

No risk reduction

The 3 months correlation between Gmo and Sit is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Sit U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit U S 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 Sit U. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit U S has no effect on the direction of Gmo Core i.e., Gmo Core and Sit U go up and down completely randomly.

Pair Corralation between Gmo Core and Sit U

Assuming the 90 days horizon Gmo E Plus is expected to generate 1.6 times more return on investment than Sit U. However, Gmo Core is 1.6 times more volatile than Sit U S. It trades about 0.15 of its potential returns per unit of risk. Sit U S is currently generating about 0.13 per unit of risk. If you would invest  1,777  in Gmo E Plus on September 5, 2024 and sell it today you would earn a total of  20.00  from holding Gmo E Plus or generate 1.13% return on investment over 90 days.

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

Gmo E Plus  vs.  Sit U S

Gmo E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo E Plus has generated negative risk-adjusted returns adding no value to fund investors. 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.

Sit U S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sit U 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 Sit U

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

The idea behind Gmo E Plus and Sit U S 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..