Correlation Between Stellar and Gmo Resources

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

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

Diversification Opportunities for Stellar and Gmo Resources

-0.3

Correlation Coefficient

Stellar  Gmo Resources

Very good diversification

The 3 months correlation between Stellar and Gmo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Gmo Resources Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and Stellar 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 Stellar are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Stellar i.e., Stellar and Gmo Resources go up and down completely randomly.

Pair Corralation between Stellar and Gmo Resources

Assuming the 90 days trading horizon Stellar is expected to generate 8.77 times more return on investment than Gmo Resources. However, Stellar is 8.77 times more volatile than Gmo Resources Fund. It trades about 0.25 of its potential returns per unit of risk. Gmo Resources Fund is currently generating about -0.12 per unit of risk. If you would invest  9.19  in Stellar on October 11, 2024 and sell it today you would earn a total of  32.81  from holding Stellar or generate 357.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Stellar  vs.  Gmo Resources Fund

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Stellar and Gmo Resources

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

The idea behind Stellar and Gmo Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.