Correlation Between Gmo Us and Gmo Resources

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

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

Diversification Opportunities for Gmo Us and Gmo Resources

0.74

Correlation Coefficient

Gmo Us  Gmo Resources

Poor diversification

The 3 months correlation between GMO and Gmo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Opportunistic Value and Gmo Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and Gmo Us 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 Opportunistic Value are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Gmo Us i.e., Gmo Us and Gmo Resources go up and down completely randomly.

Pair Corralation between Gmo Us and Gmo Resources

Assuming the 90 days horizon Gmo Opportunistic Value is expected to under-perform the Gmo Resources. In addition to that, Gmo Us is 1.02 times more volatile than Gmo Resources Fund. It trades about -0.06 of its total potential returns per unit of risk. Gmo Resources Fund is currently generating about -0.05 per unit of volatility. If you would invest  1,986  in Gmo Resources Fund on October 25, 2024 and sell it today you would lose (87.00) from holding Gmo Resources Fund or give up 4.38% of portfolio value over 90 days.

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

Gmo Opportunistic Value  vs.  Gmo Resources Fund

Gmo Opportunistic Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Gmo Resources 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 Us and Gmo Resources

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

The idea behind Gmo Opportunistic Value and Gmo Resources Fund 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.