Correlation Between Gmo Core and Trillium Smallmid

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

Diversification Opportunities for Gmo Core and Trillium Smallmid

0.54

Correlation Coefficient

Gmo Core  Trillium Smallmid

Very weak diversification

The 3 months correlation between Gmo and Trillium is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Trillium Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trillium Smallmid Cap 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 Trillium Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trillium Smallmid Cap has no effect on the direction of Gmo Core i.e., Gmo Core and Trillium Smallmid go up and down completely randomly.

Pair Corralation between Gmo Core and Trillium Smallmid

Assuming the 90 days horizon Gmo E Plus is expected to generate 0.27 times more return on investment than Trillium Smallmid. However, Gmo E Plus is 3.64 times less risky than Trillium Smallmid. It trades about 0.07 of its potential returns per unit of risk. Trillium Smallmid Cap is currently generating about -0.21 per unit of risk. If you would invest  1,724  in Gmo E Plus on December 1, 2024 and sell it today you would earn a total of  21.00  from holding Gmo E Plus or generate 1.22% return on investment over 90 days.

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

Gmo E Plus  vs.  Trillium Smallmid Cap

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 5 (%) 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.

Trillium Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trillium Smallmid Cap 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 fundamental 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 Trillium Smallmid

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

The idea behind Gmo E Plus and Trillium Smallmid Cap 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.