Correlation Between Gmo International and Gmo Equity
Can any of the company-specific risk be diversified away by investing in both Gmo International and Gmo Equity 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 Gmo Equity 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 Gmo Equity Allocation, you can compare the effects of market volatilities on Gmo International and Gmo Equity 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 Gmo Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo International and Gmo Equity.
Diversification Opportunities for Gmo International and Gmo Equity
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gmo and Gmo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Opportunisti and Gmo Equity Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Equity Allocation 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 Gmo Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Equity Allocation has no effect on the direction of Gmo International i.e., Gmo International and Gmo Equity go up and down completely randomly.
Pair Corralation between Gmo International and Gmo Equity
Assuming the 90 days horizon Gmo International Opportunistic is expected to generate 0.32 times more return on investment than Gmo Equity. However, Gmo International Opportunistic is 3.15 times less risky than Gmo Equity. It trades about -0.03 of its potential returns per unit of risk. Gmo Equity Allocation is currently generating about -0.22 per unit of risk. If you would invest 1,537 in Gmo International Opportunistic on September 12, 2024 and sell it today you would lose (6.00) from holding Gmo International Opportunistic or give up 0.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo International Opportunisti vs. Gmo Equity Allocation
Performance |
| Timeline |
| Gmo International |
| Gmo Equity Allocation |
Gmo International and Gmo Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo International and Gmo Equity
The main advantage of trading using opposite Gmo International and Gmo Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo International position performs unexpectedly, Gmo Equity 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 Equity will offset losses from the drop in Gmo Equity's long position.| Gmo International vs. Oakmark International Fund | Gmo International vs. Dodge International Stock | Gmo International vs. Oakmark International Fund | Gmo International vs. Oakmark International Fund |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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