Correlation Between Gmo Us and Small Cap
Can any of the company-specific risk be diversified away by investing in both Gmo Us and Small Cap 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 Us and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Equity Allocation and Small Cap Equity, you can compare the effects of market volatilities on Gmo Us and Small Cap 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 Us with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Us and Small Cap.
Diversification Opportunities for Gmo Us and Small Cap
Very poor diversification
The 3 months correlation between Gmo and Small is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Equity Allocation and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Gmo Us 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 Equity Allocation are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Gmo Us i.e., Gmo Us and Small Cap go up and down completely randomly.
Pair Corralation between Gmo Us and Small Cap
Assuming the 90 days horizon Gmo Us is expected to generate 2.32 times less return on investment than Small Cap. But when comparing it to its historical volatility, Gmo Equity Allocation is 1.66 times less risky than Small Cap. It trades about 0.17 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,865 in Small Cap Equity on August 30, 2024 and sell it today you would earn a total of 166.00 from holding Small Cap Equity or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Equity Allocation vs. Small Cap Equity
Performance |
| Timeline |
| Gmo Equity Allocation |
| Small Cap Equity |
Gmo Us and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Us and Small Cap
The main advantage of trading using opposite Gmo Us and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Us position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Gmo Us vs. Oppenheimer Gold Special | Gmo Us vs. Sprott Gold Equity | Gmo Us vs. Fidelity Advisor Gold | Gmo Us vs. Gamco Global Gold |
| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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