Correlation Between Pabrai Wagons and Gmo Global

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

By analyzing existing cross correlation between Pabrai Wagons Institutional and Gmo Global Developed, you can compare the effects of market volatilities on Pabrai Wagons and Gmo Global 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 Pabrai Wagons with a short position of Gmo Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pabrai Wagons and Gmo Global.

Diversification Opportunities for Pabrai Wagons and Gmo Global

0.36

Correlation Coefficient

Pabrai Wagons  Gmo Global

Weak diversification

The 3 months correlation between Pabrai and Gmo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pabrai Wagons Institutional and Gmo Global Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Developed and Pabrai Wagons 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 Pabrai Wagons Institutional are associated (or correlated) with Gmo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Global Developed has no effect on the direction of Pabrai Wagons i.e., Pabrai Wagons and Gmo Global go up and down completely randomly.

Pair Corralation between Pabrai Wagons and Gmo Global

Assuming the 90 days horizon Pabrai Wagons Institutional is expected to under-perform the Gmo Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pabrai Wagons Institutional is 1.76 times less risky than Gmo Global. The mutual fund trades about -0.56 of its potential returns per unit of risk. The Gmo Global Developed is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  2,692  in Gmo Global Developed on October 11, 2024 and sell it today you would lose (157.00) from holding Gmo Global Developed or give up 5.83% of portfolio value over 90 days.

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

Pabrai Wagons Institutional  vs.  Gmo Global Developed

Pabrai Wagons Instit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gmo Global Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Global Developed 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.

Pair Trading with Pabrai Wagons and Gmo Global

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

The idea behind Pabrai Wagons Institutional and Gmo Global Developed 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.