Correlation Between Gmo Small and Western Asset
Can any of the company-specific risk be diversified away by investing in both Gmo Small and Western Asset 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 Western Asset 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 Western Asset E, you can compare the effects of market volatilities on Gmo Small and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Western Asset.
Diversification Opportunities for Gmo Small and Western Asset
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gmo and Western is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Gmo Small i.e., Gmo Small and Western Asset go up and down completely randomly.
Pair Corralation between Gmo Small and Western Asset
Assuming the 90 days horizon Gmo Small Cap is expected to generate 3.66 times more return on investment than Western Asset. However, Gmo Small is 3.66 times more volatile than Western Asset E. It trades about 0.2 of its potential returns per unit of risk. Western Asset E is currently generating about 0.1 per unit of risk. If you would invest 2,562 in Gmo Small Cap on September 2, 2024 and sell it today you would earn a total of 155.00 from holding Gmo Small Cap or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Small Cap vs. Western Asset E
Performance |
| Timeline |
| Gmo Small Cap |
| Western Asset E |
Gmo Small and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Small and Western Asset
The main advantage of trading using opposite Gmo Small and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Small position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Gmo Small vs. Queens Road Small | Gmo Small vs. Lsv Small Cap | Gmo Small vs. Columbia Small Cap | Gmo Small vs. Ab Small Cap |
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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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