Correlation Between Gmo Global and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both Gmo Global and Hennessy Small 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 Hennessy Small 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 Hennessy Small Cap, you can compare the effects of market volatilities on Gmo Global and Hennessy Small 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 Hennessy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Hennessy Small.
Diversification Opportunities for Gmo Global and Hennessy Small
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gmo and Hennessy is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Hennessy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Small Cap 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 Hennessy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Small Cap has no effect on the direction of Gmo Global i.e., Gmo Global and Hennessy Small go up and down completely randomly.
Pair Corralation between Gmo Global and Hennessy Small
Assuming the 90 days horizon Gmo Global is expected to generate 2.01 times less return on investment than Hennessy Small. But when comparing it to its historical volatility, Gmo Global Equity is 2.49 times less risky than Hennessy Small. It trades about 0.09 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,337 in Hennessy Small Cap on September 4, 2024 and sell it today you would earn a total of 460.00 from holding Hennessy Small Cap or generate 34.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Gmo Global Equity vs. Hennessy Small Cap
Performance |
| Timeline |
| Gmo Global Equity |
| Hennessy Small Cap |
Gmo Global and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Global and Hennessy Small
The main advantage of trading using opposite Gmo Global and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, Hennessy Small 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 Hennessy Small will offset losses from the drop in Hennessy Small's long position.| Gmo Global vs. Forum Real Estate | Gmo Global vs. Columbia Real Estate | Gmo Global vs. Jhancock Real Estate | Gmo Global vs. Guggenheim Risk Managed |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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