Correlation Between Gmo Small and Federated Max
Can any of the company-specific risk be diversified away by investing in both Gmo Small and Federated Max 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 Small and Federated Max into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Small Cap and Federated Max Cap Index, you can compare the effects of market volatilities on Gmo Small and Federated Max 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 Small with a short position of Federated Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Federated Max.
Diversification Opportunities for Gmo Small and Federated Max
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gmo and Federated is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Federated Max Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Max Cap and Gmo Small 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 Small Cap are associated (or correlated) with Federated Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Max Cap has no effect on the direction of Gmo Small i.e., Gmo Small and Federated Max go up and down completely randomly.
Pair Corralation between Gmo Small and Federated Max
Assuming the 90 days horizon Gmo Small Cap is expected to generate 2.04 times more return on investment than Federated Max. However, Gmo Small is 2.04 times more volatile than Federated Max Cap Index. It trades about 0.21 of its potential returns per unit of risk. Federated Max Cap Index is currently generating about 0.32 per unit of risk. If you would invest 2,550 in Gmo Small Cap on September 1, 2024 and sell it today you would earn a total of 167.00 from holding Gmo Small Cap or generate 6.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Gmo Small Cap vs. Federated Max Cap Index
Performance |
| Timeline |
| Gmo Small Cap |
| Federated Max Cap |
Gmo Small and Federated Max Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Small and Federated Max
The main advantage of trading using opposite Gmo Small and Federated Max positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Small position performs unexpectedly, Federated Max 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 Federated Max will offset losses from the drop in Federated Max's long position.| Gmo Small vs. Gmo E Plus | Gmo Small vs. Gmo Trust | Gmo Small vs. Gmo Treasury Fund | Gmo Small vs. Gmo Emerging Markets |
| Federated Max vs. Federated Emerging Market | Federated Max vs. Federated Mdt All | Federated Max vs. Federated Mdt Balanced | Federated Max vs. Federated Global Allocation |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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