Correlation Between Gmo Core and Gmo Us

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

Diversification Opportunities for Gmo Core and Gmo Us

-0.57

Correlation Coefficient

Gmo Core  Gmo Us

Excellent diversification

The 3 months correlation between Gmo and Gmo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small 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 Gmo Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Gmo Core i.e., Gmo Core and Gmo Us go up and down completely randomly.

Pair Corralation between Gmo Core and Gmo Us

Assuming the 90 days horizon Gmo E Plus is expected to under-perform the Gmo Us. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo E Plus is 4.46 times less risky than Gmo Us. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Gmo Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,060  in Gmo Small Cap on September 5, 2024 and sell it today you would earn a total of  226.00  from holding Gmo Small Cap or generate 10.97% return on investment over 90 days.

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

Gmo E Plus  vs.  Gmo Small Cap

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 basic indicators, Gmo Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo Us may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo Core and Gmo Us

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

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