Correlation Between Nasdaq 100 and Gmo Treasury

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Gmo Treasury 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 Nasdaq 100 and Gmo Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 Index Fund and Gmo Treasury Fund, you can compare the effects of market volatilities on Nasdaq 100 and Gmo Treasury 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 Nasdaq 100 with a short position of Gmo Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Gmo Treasury.

Diversification Opportunities for Nasdaq 100 and Gmo Treasury

0.0

Correlation Coefficient

Nasdaq 100  Gmo Treasury

Pay attention - limited upside

The 3 months correlation between Nasdaq and Gmo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and Gmo Treasury Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Treasury and Nasdaq 100 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 Nasdaq 100 Index Fund are associated (or correlated) with Gmo Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Treasury has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Gmo Treasury go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Gmo Treasury

Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to generate 27.36 times more return on investment than Gmo Treasury. However, Nasdaq 100 is 27.36 times more volatile than Gmo Treasury Fund. It trades about 0.04 of its potential returns per unit of risk. Gmo Treasury Fund is currently generating about 0.1 per unit of risk. If you would invest  4,942  in Nasdaq 100 Index Fund on September 23, 2024 and sell it today you would earn a total of  296.00  from holding Nasdaq 100 Index Fund or generate 5.99% return on investment over 90 days.

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

Nasdaq 100 Index Fund  vs.  Gmo Treasury Fund

Nasdaq 100 Index

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Index Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nasdaq 100 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Treasury

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nasdaq 100 and Gmo Treasury

The main advantage of trading using opposite Nasdaq 100 and Gmo Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Gmo Treasury 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 Treasury will offset losses from the drop in Gmo Treasury's long position.

The idea behind Nasdaq 100 Index Fund and Gmo Treasury 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.