Correlation Between Gmo High and Defensive Market
Can any of the company-specific risk be diversified away by investing in both Gmo High and Defensive Market 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 Defensive Market 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 Defensive Market Strategies, you can compare the effects of market volatilities on Gmo High and Defensive Market 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 Defensive Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Defensive Market.
Diversification Opportunities for Gmo High and Defensive Market
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gmo and Defensive is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Defensive Market Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defensive Market Str 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 Defensive Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defensive Market Str has no effect on the direction of Gmo High i.e., Gmo High and Defensive Market go up and down completely randomly.
Pair Corralation between Gmo High and Defensive Market
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.38 times more return on investment than Defensive Market. However, Gmo High Yield is 2.62 times less risky than Defensive Market. It trades about 0.16 of its potential returns per unit of risk. Defensive Market Strategies is currently generating about 0.04 per unit of risk. If you would invest 1,547 in Gmo High Yield on November 3, 2024 and sell it today you would earn a total of 141.00 from holding Gmo High Yield or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Defensive Market Strategies
Performance |
| Timeline |
| Gmo High Yield |
| Defensive Market Str |
Gmo High and Defensive Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Defensive Market
The main advantage of trading using opposite Gmo High and Defensive Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Defensive Market 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 Defensive Market will offset losses from the drop in Defensive Market's long position.| Gmo High vs. Gmo International Equity | Gmo High vs. Artisan Select Equity | Gmo High vs. Small Cap Equity | Gmo High vs. Qs Global Equity |
| Defensive Market vs. Franklin Gold Precious | Defensive Market vs. Great West Goldman Sachs | Defensive Market vs. Vy Goldman Sachs | Defensive Market vs. Short Precious Metals |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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