Correlation Between Gmo Global and Madison Funds
Can any of the company-specific risk be diversified away by investing in both Gmo Global and Madison Funds 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 Madison Funds 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 Madison Funds , you can compare the effects of market volatilities on Gmo Global and Madison Funds 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 Madison Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Madison Funds.
Diversification Opportunities for Gmo Global and Madison Funds
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Madison is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Madison Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Funds 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 Madison Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Funds has no effect on the direction of Gmo Global i.e., Gmo Global and Madison Funds go up and down completely randomly.
Pair Corralation between Gmo Global and Madison Funds
Assuming the 90 days horizon Gmo Global Equity is expected to generate 2.16 times more return on investment than Madison Funds. However, Gmo Global is 2.16 times more volatile than Madison Funds . It trades about 0.07 of its potential returns per unit of risk. Madison Funds is currently generating about 0.04 per unit of risk. If you would invest 2,172 in Gmo Global Equity on December 12, 2024 and sell it today you would earn a total of 710.00 from holding Gmo Global Equity or generate 32.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Global Equity vs. Madison Funds
Performance |
| Timeline |
| Gmo Global Equity |
| Madison Funds |
Gmo Global and Madison Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Global and Madison Funds
The main advantage of trading using opposite Gmo Global and Madison Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, Madison Funds 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 Madison Funds will offset losses from the drop in Madison Funds' long position.| Gmo Global vs. Shelton Emerging Markets | ||
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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