Correlation Between Americafirst Large and Gmo Trust

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

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

Diversification Opportunities for Americafirst Large and Gmo Trust

0.9

Correlation Coefficient

Americafirst Large  Gmo Trust

Almost no diversification

The 3 months correlation between Americafirst and Gmo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Americafirst Large Cap and Gmo Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Trust and Americafirst Large 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 Americafirst Large Cap 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 Americafirst Large i.e., Americafirst Large and Gmo Trust go up and down completely randomly.

Pair Corralation between Americafirst Large and Gmo Trust

Assuming the 90 days horizon Americafirst Large Cap is expected to generate 0.55 times more return on investment than Gmo Trust. However, Americafirst Large Cap is 1.81 times less risky than Gmo Trust. It trades about 0.06 of its potential returns per unit of risk. Gmo Trust is currently generating about -0.05 per unit of risk. If you would invest  1,125  in Americafirst Large Cap on December 2, 2024 and sell it today you would earn a total of  222.00  from holding Americafirst Large Cap or generate 19.73% return on investment over 90 days.

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

Americafirst Large Cap  vs.  Gmo Trust

Americafirst Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Americafirst Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Gmo Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gmo Trust 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Americafirst Large and Gmo Trust

The main advantage of trading using opposite Americafirst Large and Gmo Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Americafirst Large 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 Americafirst Large Cap 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.