Correlation Between Sentinel Common and Gmo Quality

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

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

Diversification Opportunities for Sentinel Common and Gmo Quality

0.9

Correlation Coefficient

Sentinel Common  Gmo Quality

Almost no diversification

The 3 months correlation between Sentinel and Gmo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Mon Stock and Gmo Quality Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Quality Fund and Sentinel Common 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 Sentinel Mon Stock are associated (or correlated) with Gmo Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Quality Fund has no effect on the direction of Sentinel Common i.e., Sentinel Common and Gmo Quality go up and down completely randomly.

Pair Corralation between Sentinel Common and Gmo Quality

Assuming the 90 days horizon Sentinel Mon Stock is expected to under-perform the Gmo Quality. In addition to that, Sentinel Common is 1.23 times more volatile than Gmo Quality Fund. It trades about -0.07 of its total potential returns per unit of risk. Gmo Quality Fund is currently generating about -0.03 per unit of volatility. If you would invest  3,268  in Gmo Quality Fund on December 29, 2024 and sell it today you would lose (55.00) from holding Gmo Quality Fund or give up 1.68% of portfolio value over 90 days.

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

Sentinel Mon Stock  vs.  Gmo Quality Fund

Sentinel Mon Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Mon Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sentinel Common is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Quality Fund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sentinel Common and Gmo Quality

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

The idea behind Sentinel Mon Stock and Gmo Quality 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .