Correlation Between Gmo International and Gmo Trust

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

Diversification Opportunities for Gmo International and Gmo Trust

0.03

Correlation Coefficient

Gmo International  Gmo Trust

Significant diversification

The 3 months correlation between Gmo and Gmo is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Opportunisti and Gmo Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Trust has no effect on the direction of Gmo International i.e., Gmo International and Gmo Trust go up and down completely randomly.

Pair Corralation between Gmo International and Gmo Trust

Assuming the 90 days horizon Gmo International Opportunistic is expected to generate 1.08 times more return on investment than Gmo Trust. However, Gmo International is 1.08 times more volatile than Gmo Trust . It trades about 0.26 of its potential returns per unit of risk. Gmo Trust is currently generating about 0.03 per unit of risk. If you would invest  1,383  in Gmo International Opportunistic on December 27, 2024 and sell it today you would earn a total of  197.00  from holding Gmo International Opportunistic or generate 14.24% return on investment over 90 days.

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

Gmo International Opportunisti  vs.  Gmo Trust

Gmo International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo International Opportunistic are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Gmo International showed solid returns over the last few months and may actually be approaching a breakup point.

Gmo Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Trust are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Trust 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 Trust

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

The idea behind Gmo International Opportunistic and Gmo Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.