Correlation Between Us Government and Gmo Trust
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government and Gmo Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Gmo Trust , you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of Gmo Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Gmo Trust.
Diversification Opportunities for Us Government and Gmo Trust
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CGTAX and Gmo is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Gmo Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Trust and Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Gmo Trust go up and down completely randomly.
Pair Corralation between Us Government and Gmo Trust
Assuming the 90 days horizon Us Government Securities is expected to under-perform the Gmo Trust. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Securities is 4.26 times less risky than Gmo Trust. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Gmo Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,386 in Gmo Trust on August 25, 2024 and sell it today you would earn a total of 67.00 from holding Gmo Trust or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Gmo Trust
Performance |
| Timeline |
| Us Government Securities |
| Gmo Trust |
Us Government and Gmo Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Gmo Trust
The main advantage of trading using opposite Us Government and Gmo Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Government Securities Fund | Us Government vs. John Hancock Government | Us Government vs. Short Term Government Fund | Us Government vs. Us Government Securities |
| Gmo Trust vs. Us Government Securities | Gmo Trust vs. Fidelity Series Government | Gmo Trust vs. John Hancock Government | Gmo Trust vs. Franklin Adjustable Government |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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