Correlation Between Gmo High and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Gmo High and Smallcap World 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 Gmo High and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Smallcap World Fund, you can compare the effects of market volatilities on Gmo High and Smallcap World 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 Gmo High with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Smallcap World.
Diversification Opportunities for Gmo High and Smallcap World
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gmo and Smallcap is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Gmo High 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 Gmo High Yield are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Gmo High i.e., Gmo High and Smallcap World go up and down completely randomly.
Pair Corralation between Gmo High and Smallcap World
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.16 times more return on investment than Smallcap World. However, Gmo High Yield is 6.29 times less risky than Smallcap World. It trades about -0.19 of its potential returns per unit of risk. Smallcap World Fund is currently generating about -0.12 per unit of risk. If you would invest 1,703 in Gmo High Yield on December 30, 2024 and sell it today you would lose (15.00) from holding Gmo High Yield or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Smallcap World Fund
Performance |
| Timeline |
| Gmo High Yield |
| Smallcap World |
Gmo High and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Smallcap World
The main advantage of trading using opposite Gmo High and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| Gmo High vs. Calvert Large Cap | ||
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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