Correlation Between Gmo Global and California Municipal
Can any of the company-specific risk be diversified away by investing in both Gmo Global and California Municipal 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 California Municipal 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 California Municipal Fund, you can compare the effects of market volatilities on Gmo Global and California Municipal 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 California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and California Municipal.
Diversification Opportunities for Gmo Global and California Municipal
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gmo and California is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and California Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal 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 California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Gmo Global i.e., Gmo Global and California Municipal go up and down completely randomly.
Pair Corralation between Gmo Global and California Municipal
Assuming the 90 days horizon Gmo Global Equity is expected to generate 2.96 times more return on investment than California Municipal. However, Gmo Global is 2.96 times more volatile than California Municipal Fund. It trades about 0.15 of its potential returns per unit of risk. California Municipal Fund is currently generating about 0.07 per unit of risk. If you would invest 2,977 in Gmo Global Equity on September 15, 2024 and sell it today you would earn a total of 41.00 from holding Gmo Global Equity or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Global Equity vs. California Municipal Fund
Performance |
| Timeline |
| Gmo Global Equity |
| California Municipal |
Gmo Global and California Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Global and California Municipal
The main advantage of trading using opposite Gmo Global and California Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, California Municipal 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 California Municipal will offset losses from the drop in California Municipal's long position.| Gmo Global vs. Icon Information Technology | Gmo Global vs. Blackrock Science Technology | Gmo Global vs. Firsthand Technology Opportunities | Gmo Global vs. Towpath Technology |
| California Municipal vs. Multimedia Portfolio Multimedia | California Municipal vs. Artisan Select Equity | California Municipal vs. Scharf Fund Retail | California Municipal vs. Gmo Global Equity |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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