Correlation Between Gmo International and Gmo Resources
Can any of the company-specific risk be diversified away by investing in both Gmo International and Gmo Resources 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 Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo International Equity and Gmo Resources, you can compare the effects of market volatilities on Gmo International and Gmo Resources 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 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo International and Gmo Resources.
Diversification Opportunities for Gmo International and Gmo Resources
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Gmo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Equity and Gmo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources 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 Equity are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Gmo International i.e., Gmo International and Gmo Resources go up and down completely randomly.
Pair Corralation between Gmo International and Gmo Resources
Assuming the 90 days horizon Gmo International Equity is expected to under-perform the Gmo Resources. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo International Equity is 1.51 times less risky than Gmo Resources. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Gmo Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,043 in Gmo Resources on August 27, 2024 and sell it today you would lose (12.00) from holding Gmo Resources or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo International Equity vs. Gmo Resources
Performance |
| Timeline |
| Gmo International Equity |
| Gmo Resources |
Gmo International and Gmo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo International and Gmo Resources
The main advantage of trading using opposite Gmo International and Gmo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo International position performs unexpectedly, Gmo Resources 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 Resources will offset losses from the drop in Gmo Resources' long position.| Gmo International vs. California High Yield Municipal | Gmo International vs. Artisan High Income | Gmo International vs. Lgm Risk Managed | Gmo International vs. Ab Global Risk |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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