Correlation Between Gmo Small and Gmo Asset
Can any of the company-specific risk be diversified away by investing in both Gmo Small and Gmo 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 Gmo 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 Gmo Asset Allocation, you can compare the effects of market volatilities on Gmo Small and Gmo 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 Gmo Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Gmo Asset.
Diversification Opportunities for Gmo Small and Gmo Asset
Very poor diversification
The 3 months correlation between Gmo and Gmo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Gmo Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Asset Allocation 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Asset Allocation has no effect on the direction of Gmo Small i.e., Gmo Small and Gmo Asset go up and down completely randomly.
Pair Corralation between Gmo Small and Gmo Asset
Assuming the 90 days horizon Gmo Small is expected to generate 4.17 times less return on investment than Gmo Asset. But when comparing it to its historical volatility, Gmo Small Cap is 1.03 times less risky than Gmo Asset. It trades about 0.07 of its potential returns per unit of risk. Gmo Asset Allocation is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,723 in Gmo Asset Allocation on November 9, 2024 and sell it today you would earn a total of 93.00 from holding Gmo Asset Allocation or generate 5.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Small Cap vs. Gmo Asset Allocation
Performance |
| Timeline |
| Gmo Small Cap |
| Gmo Asset Allocation |
Gmo Small and Gmo Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Small and Gmo Asset
The main advantage of trading using opposite Gmo Small and Gmo Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Small position performs unexpectedly, Gmo 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 Gmo Asset will offset losses from the drop in Gmo Asset's long position.| Gmo Small vs. Hartford Healthcare Hls | Gmo Small vs. Allianzgi Health Sciences | Gmo Small vs. Alger Health Sciences | Gmo Small vs. Tekla Healthcare Investors |
| Gmo Asset vs. Gmo E Plus | Gmo Asset vs. Gmo Trust | Gmo Asset vs. Gmo Small Cap | Gmo Asset vs. Gmo International Opportunistic |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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