Correlation Between 1919 Financial and Gmo Core

Can any of the company-specific risk be diversified away by investing in both 1919 Financial and Gmo Core 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 1919 Financial and Gmo Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1919 Financial Services and Gmo E Plus, you can compare the effects of market volatilities on 1919 Financial and Gmo Core 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 1919 Financial with a short position of Gmo Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1919 Financial and Gmo Core.

Diversification Opportunities for 1919 Financial and Gmo Core

0.1

Correlation Coefficient

1919 Financial  Gmo Core

Average diversification

The 3 months correlation between 1919 and Gmo is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding 1919 Financial Services and Gmo E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo E Plus and 1919 Financial 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 1919 Financial Services are associated (or correlated) with Gmo Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo E Plus has no effect on the direction of 1919 Financial i.e., 1919 Financial and Gmo Core go up and down completely randomly.

Pair Corralation between 1919 Financial and Gmo Core

Assuming the 90 days horizon 1919 Financial is expected to generate 1.38 times less return on investment than Gmo Core. In addition to that, 1919 Financial is 3.61 times more volatile than Gmo E Plus. It trades about 0.03 of its total potential returns per unit of risk. Gmo E Plus is currently generating about 0.16 per unit of volatility. If you would invest  1,692  in Gmo E Plus on December 27, 2024 and sell it today you would earn a total of  47.00  from holding Gmo E Plus or generate 2.78% return on investment over 90 days.

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

1919 Financial Services  vs.  Gmo E Plus

1919 Financial Services

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 1919 Financial Services are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, 1919 Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo E Plus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo E Plus are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 1919 Financial and Gmo Core

The main advantage of trading using opposite 1919 Financial and Gmo Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1919 Financial position performs unexpectedly, Gmo Core 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 Core will offset losses from the drop in Gmo Core's long position.

The idea behind 1919 Financial Services and Gmo E Plus 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.