Correlation Between Gmo Global and Small Cap
Can any of the company-specific risk be diversified away by investing in both Gmo Global and Small Cap 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 Small Cap 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 Small Cap Value Profund, you can compare the effects of market volatilities on Gmo Global and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Global and Small Cap.
Diversification Opportunities for Gmo Global and Small Cap
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gmo and Small is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Global Equity and Small Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Gmo Global i.e., Gmo Global and Small Cap go up and down completely randomly.
Pair Corralation between Gmo Global and Small Cap
Assuming the 90 days horizon Gmo Global is expected to generate 5.58 times less return on investment than Small Cap. But when comparing it to its historical volatility, Gmo Global Equity is 2.1 times less risky than Small Cap. It trades about 0.06 of its potential returns per unit of risk. Small Cap Value Profund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 8,168 in Small Cap Value Profund on September 12, 2024 and sell it today you would earn a total of 993.00 from holding Small Cap Value Profund or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Global Equity vs. Small Cap Value Profund
Performance |
| Timeline |
| Gmo Global Equity |
| Small Cap Value |
Gmo Global and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Global and Small Cap
The main advantage of trading using opposite Gmo Global and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Global position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Gmo Global vs. Gmo E Plus | Gmo Global vs. Gmo Trust | Gmo Global vs. Gmo Treasury Fund | Gmo Global vs. Gmo Trust |
| Small Cap vs. Valic Company I | Small Cap vs. Mutual Of America | Small Cap vs. Lsv Small Cap | Small Cap vs. Pace Smallmedium Value |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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