Correlation Between Small Cap and Gmo Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Gmo Small 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 Small Cap and Gmo Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Gmo Small Cap, you can compare the effects of market volatilities on Small Cap and Gmo Small 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 Small Cap with a short position of Gmo Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Gmo Small.
Diversification Opportunities for Small Cap and Gmo Small
Almost no diversification
The 3 months correlation between Small and Gmo is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap and Small Cap 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 Small Cap Growth are associated (or correlated) with Gmo Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Gmo Small go up and down completely randomly.
Pair Corralation between Small Cap and Gmo Small
Assuming the 90 days horizon Small Cap Growth is expected to generate 1.05 times more return on investment than Gmo Small. However, Small Cap is 1.05 times more volatile than Gmo Small Cap. It trades about 0.09 of its potential returns per unit of risk. Gmo Small Cap is currently generating about 0.07 per unit of risk. If you would invest 1,721 in Small Cap Growth on September 3, 2024 and sell it today you would earn a total of 302.00 from holding Small Cap Growth or generate 17.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Gmo Small Cap
Performance |
| Timeline |
| Small Cap Growth |
| Gmo Small Cap |
Small Cap and Gmo Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Gmo Small
The main advantage of trading using opposite Small Cap and Gmo Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Gmo Small 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 Small will offset losses from the drop in Gmo Small's long position.| Small Cap vs. Goldman Sachs Real | Small Cap vs. Commonwealth Real Estate | Small Cap vs. Tiaa Cref Real Estate | Small Cap vs. Vanguard Reit Index |
| Gmo Small vs. The Hartford Midcap | Gmo Small vs. Mfs Emerging Markets | Gmo Small vs. Wells Fargo Special | Gmo Small vs. Washington Mutual Investors |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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