Correlation Between Gmo Global and Ep Emerging

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

By analyzing existing cross correlation between Gmo Global Developed and Ep Emerging Markets, you can compare the effects of market volatilities on Gmo Global and Ep Emerging 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 Global with a short position of Ep Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Ep Emerging.

Diversification Opportunities for Gmo Global and Ep Emerging

0.73

Correlation Coefficient

Gmo Global  Ep Emerging

Poor diversification

The 3 months correlation between GMO and EPASX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Developed and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets and Gmo Global 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 Global Developed are associated (or correlated) with Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Gmo Global i.e., Gmo Global and Ep Emerging go up and down completely randomly.

Pair Corralation between Gmo Global and Ep Emerging

Assuming the 90 days horizon Gmo Global Developed is expected to generate 1.09 times more return on investment than Ep Emerging. However, Gmo Global is 1.09 times more volatile than Ep Emerging Markets. It trades about 0.1 of its potential returns per unit of risk. Ep Emerging Markets is currently generating about 0.1 per unit of risk. If you would invest  2,518  in Gmo Global Developed on December 28, 2024 and sell it today you would earn a total of  108.00  from holding Gmo Global Developed or generate 4.29% return on investment over 90 days.

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

Gmo Global Developed  vs.  Ep Emerging Markets

Gmo Global Developed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Global Developed are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ep Emerging Markets

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ep Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ep Emerging 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 Global and Ep Emerging

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

The idea behind Gmo Global Developed and Ep Emerging Markets 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.