Correlation Between American Funds and Gmo International
Can any of the company-specific risk be diversified away by investing in both American Funds and Gmo International 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 American Funds and Gmo International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Conservative and Gmo International Opportunistic, you can compare the effects of market volatilities on American Funds and Gmo International 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 American Funds with a short position of Gmo International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Gmo International.
Diversification Opportunities for American Funds and Gmo International
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Gmo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Gmo International Opportunisti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo International and American Funds 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 American Funds Conservative are associated (or correlated) with Gmo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo International has no effect on the direction of American Funds i.e., American Funds and Gmo International go up and down completely randomly.
Pair Corralation between American Funds and Gmo International
Assuming the 90 days horizon American Funds Conservative is expected to generate 0.41 times more return on investment than Gmo International. However, American Funds Conservative is 2.41 times less risky than Gmo International. It trades about 0.17 of its potential returns per unit of risk. Gmo International Opportunistic is currently generating about 0.0 per unit of risk. If you would invest 1,272 in American Funds Conservative on September 1, 2024 and sell it today you would earn a total of 99.00 from holding American Funds Conservative or generate 7.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
American Funds Conservative vs. Gmo International Opportunisti
Performance |
| Timeline |
| American Funds Conse |
| Gmo International |
American Funds and Gmo International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Gmo International
The main advantage of trading using opposite American Funds and Gmo International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Gmo International 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 International will offset losses from the drop in Gmo International's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Gmo International vs. Gmo E Plus | Gmo International vs. Gmo Trust | Gmo International vs. Gmo Treasury Fund | Gmo International vs. Gmo Trust |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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