Correlation Between Gmo International and Gmo Emerging

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

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

Diversification Opportunities for Gmo International and Gmo Emerging

0.84

Correlation Coefficient

Gmo International  Gmo Emerging

Very poor diversification

The 3 months correlation between Gmo and Gmo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Opportunisti and Gmo Emerging Country in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Country and Gmo International 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 International Opportunistic are associated (or correlated) with Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Country has no effect on the direction of Gmo International i.e., Gmo International and Gmo Emerging go up and down completely randomly.

Pair Corralation between Gmo International and Gmo Emerging

Assuming the 90 days horizon Gmo International Opportunistic is expected to under-perform the Gmo Emerging. In addition to that, Gmo International is 1.55 times more volatile than Gmo Emerging Country. It trades about -0.18 of its total potential returns per unit of risk. Gmo Emerging Country is currently generating about -0.11 per unit of volatility. If you would invest  2,078  in Gmo Emerging Country on October 8, 2024 and sell it today you would lose (109.00) from holding Gmo Emerging Country or give up 5.25% of portfolio value over 90 days.

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

Gmo International Opportunisti  vs.  Gmo Emerging Country

Gmo International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo International Opportunistic 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Gmo Emerging Country

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Emerging Country has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gmo 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 International and Gmo Emerging

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

The idea behind Gmo International Opportunistic and Gmo Emerging Country 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.