Correlation Between Gmo Equity and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Gmo Equity and Sp Smallcap 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 Equity and Sp Smallcap 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 Sp Smallcap Index, you can compare the effects of market volatilities on Gmo Equity and Sp Smallcap 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 Equity with a short position of Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Equity and Sp Smallcap.
Diversification Opportunities for Gmo Equity and Sp Smallcap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gmo and SMLKX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Equity Allocation and Sp Smallcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap Index and Gmo Equity 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap Index has no effect on the direction of Gmo Equity i.e., Gmo Equity and Sp Smallcap go up and down completely randomly.
Pair Corralation between Gmo Equity and Sp Smallcap
Assuming the 90 days horizon Gmo Equity is expected to generate 1.75 times less return on investment than Sp Smallcap. But when comparing it to its historical volatility, Gmo Equity Allocation is 1.37 times less risky than Sp Smallcap. It trades about 0.03 of its potential returns per unit of risk. Sp Smallcap Index is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,133 in Sp Smallcap Index on September 1, 2024 and sell it today you would earn a total of 142.00 from holding Sp Smallcap Index or generate 6.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Gmo Equity Allocation vs. Sp Smallcap Index
Performance |
| Timeline |
| Gmo Equity Allocation |
| Sp Smallcap Index |
Gmo Equity and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Equity and Sp Smallcap
The main advantage of trading using opposite Gmo Equity and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Equity position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.| Gmo Equity vs. Blrc Sgy Mnp | Gmo Equity vs. Oklahoma Municipal Fund | Gmo Equity vs. Ishares Municipal Bond | Gmo Equity vs. Pace Municipal Fixed |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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