Correlation Between Gmo Global and Parametric Intl

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Can any of the company-specific risk be diversified away by investing in both Gmo Global and Parametric Intl 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 Global and Parametric Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Global Equity and Parametric Intl Equity, you can compare the effects of market volatilities on Gmo Global and Parametric Intl 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 Global with a short position of Parametric Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Parametric Intl.

Diversification Opportunities for Gmo Global and Parametric Intl

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Gmo and Parametric is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Parametric Intl Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Intl Equity and Gmo Global 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 Global Equity are associated (or correlated) with Parametric Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Intl Equity has no effect on the direction of Gmo Global i.e., Gmo Global and Parametric Intl go up and down completely randomly.

Pair Corralation between Gmo Global and Parametric Intl

Assuming the 90 days horizon Gmo Global Equity is expected to generate 1.0 times more return on investment than Parametric Intl. However, Gmo Global Equity is 1.0 times less risky than Parametric Intl. It trades about 0.08 of its potential returns per unit of risk. Parametric Intl Equity is currently generating about 0.05 per unit of risk. If you would invest  2,236  in Gmo Global Equity on August 30, 2024 and sell it today you would earn a total of  769.00  from holding Gmo Global Equity or generate 34.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Gmo Global Equity  vs.  Parametric Intl Equity

 Performance 
       Timeline  
Gmo Global Equity 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gmo Global Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Gmo Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Parametric Intl Equity 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Parametric Intl Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Parametric Intl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Global and Parametric Intl Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gmo Global and Parametric Intl

The main advantage of trading using opposite Gmo Global and Parametric Intl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, Parametric Intl 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 Parametric Intl will offset losses from the drop in Parametric Intl's long position.
The idea behind Gmo Global Equity and Parametric Intl 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.
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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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