Correlation Between Gmo International and California High-yield
Can any of the company-specific risk be diversified away by investing in both Gmo International and California High-yield 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 International and California High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo International Opportunistic and California High Yield Municipal, you can compare the effects of market volatilities on Gmo International and California High-yield 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 International with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo International and California High-yield.
Diversification Opportunities for Gmo International and California High-yield
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gmo and California is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Opportunisti and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield and Gmo International 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 International Opportunistic are associated (or correlated) with California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of Gmo International i.e., Gmo International and California High-yield go up and down completely randomly.
Pair Corralation between Gmo International and California High-yield
Assuming the 90 days horizon Gmo International Opportunistic is expected to under-perform the California High-yield. In addition to that, Gmo International is 2.53 times more volatile than California High Yield Municipal. It trades about -0.18 of its total potential returns per unit of risk. California High Yield Municipal is currently generating about 0.22 per unit of volatility. If you would invest 978.00 in California High Yield Municipal on August 30, 2024 and sell it today you would earn a total of 15.00 from holding California High Yield Municipal or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo International Opportunisti vs. California High Yield Municipa
Performance |
| Timeline |
| Gmo International |
| California High Yield |
Gmo International and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo International and California High-yield
The main advantage of trading using opposite Gmo International and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo International position performs unexpectedly, California High-yield 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 California High-yield will offset losses from the drop in California High-yield's long position.The idea behind Gmo International Opportunistic and California High Yield Municipal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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