Correlation Between Gmo High and Sprucegrove International
Can any of the company-specific risk be diversified away by investing in both Gmo High and Sprucegrove 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 Gmo High and Sprucegrove International 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 Sprucegrove International Equity, you can compare the effects of market volatilities on Gmo High and Sprucegrove 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 Gmo High with a short position of Sprucegrove International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Sprucegrove International.
Diversification Opportunities for Gmo High and Sprucegrove International
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Sprucegrove is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Sprucegrove International Equi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprucegrove International 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 Sprucegrove International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprucegrove International has no effect on the direction of Gmo High i.e., Gmo High and Sprucegrove International go up and down completely randomly.
Pair Corralation between Gmo High and Sprucegrove International
Assuming the 90 days horizon Gmo High Yield is expected to generate 1.61 times more return on investment than Sprucegrove International. However, Gmo High is 1.61 times more volatile than Sprucegrove International Equity. It trades about -0.24 of its potential returns per unit of risk. Sprucegrove International Equity is currently generating about -0.43 per unit of risk. If you would invest 1,817 in Gmo High Yield on October 9, 2024 and sell it today you would lose (145.00) from holding Gmo High Yield or give up 7.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Sprucegrove International Equi
Performance |
| Timeline |
| Gmo High Yield |
| Sprucegrove International |
Gmo High and Sprucegrove International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Sprucegrove International
The main advantage of trading using opposite Gmo High and Sprucegrove International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Sprucegrove 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 Sprucegrove International will offset losses from the drop in Sprucegrove International's long position.The idea behind Gmo High Yield and Sprucegrove International Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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