Correlation Between Gmo Treasury and Balanced Fund

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

Diversification Opportunities for Gmo Treasury and Balanced Fund

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Correlation Coefficient

Gmo Treasury  Balanced Fund

Pay attention - limited upside

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

Pair Corralation between Gmo Treasury and Balanced Fund

Assuming the 90 days horizon Gmo Treasury is expected to generate 3.78 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Gmo Treasury Fund is 6.51 times less risky than Balanced Fund. It trades about 0.17 of its potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,524  in Balanced Fund Investor on September 20, 2024 and sell it today you would earn a total of  449.00  from holding Balanced Fund Investor or generate 29.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Gmo Treasury Fund  vs.  Balanced Fund Investor

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.

Balanced Fund Investor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund 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 Balanced Fund

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

The idea behind Gmo Treasury Fund and Balanced Fund Investor 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.