Correlation Between Gmo Treasury and Century Small

Can any of the company-specific risk be diversified away by investing in both Gmo Treasury and Century Small 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 Treasury and Century Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gmo Treasury Fund and Century Small Cap, you can compare the effects of market volatilities on Gmo Treasury and Century Small 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 Treasury with a short position of Century Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Treasury and Century Small.

Diversification Opportunities for Gmo Treasury and Century Small

0.0

Correlation Coefficient

Gmo Treasury  Century Small

Pay attention - limited upside

The 3 months correlation between Gmo and Century is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Treasury Fund and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap and Gmo Treasury 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 Treasury Fund are associated (or correlated) with Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Gmo Treasury i.e., Gmo Treasury and Century Small go up and down completely randomly.

Pair Corralation between Gmo Treasury and Century Small

Assuming the 90 days horizon Gmo Treasury is expected to generate 5.63 times less return on investment than Century Small. But when comparing it to its historical volatility, Gmo Treasury Fund is 13.85 times less risky than Century Small. It trades about 0.17 of its potential returns per unit of risk. Century Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,818  in Century Small Cap on September 20, 2024 and sell it today you would earn a total of  1,235  from holding Century Small Cap or generate 43.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gmo Treasury Fund  vs.  Century Small Cap

Gmo Treasury

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Treasury Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gmo Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Century Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Century Small 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 Treasury and Century Small

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

The idea behind Gmo Treasury Fund and Century 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.