Correlation Between Gmo Small and Gmo International
Can any of the company-specific risk be diversified away by investing in both Gmo Small and Gmo International 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 International 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 International Opportunistic, you can compare the effects of market volatilities on Gmo Small and Gmo International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Gmo International.
Diversification Opportunities for Gmo Small and Gmo International
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gmo and Gmo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Gmo International Opportunisti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo International has no effect on the direction of Gmo Small i.e., Gmo Small and Gmo International go up and down completely randomly.
Pair Corralation between Gmo Small and Gmo International
Assuming the 90 days horizon Gmo Small Cap is expected to generate 1.37 times more return on investment than Gmo International. However, Gmo Small is 1.37 times more volatile than Gmo International Opportunistic. It trades about 0.08 of its potential returns per unit of risk. Gmo International Opportunistic is currently generating about 0.06 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 823.00 from holding Gmo Small Cap or generate 45.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.36% |
| Values | Daily Returns |
Gmo Small Cap vs. Gmo International Opportunisti
Performance |
| Timeline |
| Gmo Small Cap |
| Gmo International |
Gmo Small and Gmo International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Small and Gmo International
The main advantage of trading using opposite Gmo Small and Gmo International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Small position performs unexpectedly, Gmo International 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 International will offset losses from the drop in Gmo International's long position.| Gmo Small vs. Ms Global Fixed | Gmo Small vs. T Rowe Price | Gmo Small vs. Vanguard Global Credit | Gmo Small vs. Maryland Tax Free Bond |
| Gmo International vs. Gmo E Plus | Gmo International vs. Gmo Trust | Gmo International vs. Gmo Treasury Fund | Gmo International vs. Gmo Trust |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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