Correlation Between Vanguard Value and Gmo Trust

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

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

Diversification Opportunities for Vanguard Value and Gmo Trust

0.87

Correlation Coefficient

Vanguard Value  Gmo Trust

Very poor diversification

The 3 months correlation between Vanguard and Gmo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Gmo Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Trust and Vanguard Value 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 Vanguard Value Index 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 Vanguard Value i.e., Vanguard Value and Gmo Trust go up and down completely randomly.

Pair Corralation between Vanguard Value and Gmo Trust

Assuming the 90 days horizon Vanguard Value Index is expected to generate 0.58 times more return on investment than Gmo Trust. However, Vanguard Value Index is 1.72 times less risky than Gmo Trust. It trades about 0.0 of its potential returns per unit of risk. Gmo Trust is currently generating about -0.07 per unit of risk. If you would invest  6,831  in Vanguard Value Index on October 21, 2024 and sell it today you would lose (16.00) from holding Vanguard Value Index or give up 0.23% of portfolio value over 90 days.

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

Vanguard Value Index  vs.  Gmo Trust

Vanguard Value Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gmo Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Value and Gmo Trust

The main advantage of trading using opposite Vanguard Value and Gmo Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Vanguard Value Index 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.