Correlation Between Gmo Small and Gmo Emerging
Can any of the company-specific risk be diversified away by investing in both Gmo Small and Gmo Emerging 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 Gmo Emerging 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 Gmo Emerging Markets, you can compare the effects of market volatilities on Gmo Small and Gmo Emerging 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 Gmo Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Gmo Emerging.
Diversification Opportunities for Gmo Small and Gmo Emerging
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gmo and Gmo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Gmo Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Markets 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 Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Markets has no effect on the direction of Gmo Small i.e., Gmo Small and Gmo Emerging go up and down completely randomly.
Pair Corralation between Gmo Small and Gmo Emerging
Assuming the 90 days horizon Gmo Small Cap is expected to generate 1.27 times more return on investment than Gmo Emerging. However, Gmo Small is 1.27 times more volatile than Gmo Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. Gmo Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 1,829 in Gmo Small Cap on August 26, 2024 and sell it today you would earn a total of 825.00 from holding Gmo Small Cap or generate 45.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Small Cap vs. Gmo Emerging Markets
Performance |
| Timeline |
| Gmo Small Cap |
| Gmo Emerging Markets |
Gmo Small and Gmo Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Small and Gmo Emerging
The main advantage of trading using opposite Gmo Small and Gmo Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Small position performs unexpectedly, Gmo Emerging 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 Gmo Emerging will offset losses from the drop in Gmo Emerging's long position.| Gmo Small vs. Gmo E Plus | Gmo Small vs. Gmo Trust | Gmo Small vs. Gmo Treasury Fund | Gmo Small vs. Gmo Trust |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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