Correlation Between Applied Finance and Gmo Trust
Can any of the company-specific risk be diversified away by investing in both Applied Finance 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 Applied Finance and Gmo Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Gmo Trust , you can compare the effects of market volatilities on Applied Finance 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 Applied Finance with a short position of Gmo Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Gmo Trust.
Diversification Opportunities for Applied Finance and Gmo Trust
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Gmo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Gmo Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Trust and Applied Finance 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 Applied Finance Explorer 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 Applied Finance i.e., Applied Finance and Gmo Trust go up and down completely randomly.
Pair Corralation between Applied Finance and Gmo Trust
Assuming the 90 days horizon Applied Finance Explorer is expected to under-perform the Gmo Trust. In addition to that, Applied Finance is 1.55 times more volatile than Gmo Trust . It trades about -0.29 of its total potential returns per unit of risk. Gmo Trust is currently generating about -0.12 per unit of volatility. If you would invest 2,262 in Gmo Trust on November 27, 2024 and sell it today you would lose (32.00) from holding Gmo Trust or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Gmo Trust
Performance |
| Timeline |
| Applied Finance Explorer |
| Gmo Trust |
Applied Finance and Gmo Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Gmo Trust
The main advantage of trading using opposite Applied Finance and Gmo Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Gmo Trust vs. Profunds Large Cap Growth | Gmo Trust vs. Small Pany Growth | Gmo Trust vs. T Rowe Price | Gmo Trust vs. L Mason Qs |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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