Correlation Between Gmo Resources and Boston Common
Can any of the company-specific risk be diversified away by investing in both Gmo Resources and Boston Common 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 Resources and Boston Common into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Resources and Boston Mon International, you can compare the effects of market volatilities on Gmo Resources and Boston Common 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 Resources with a short position of Boston Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Resources and Boston Common.
Diversification Opportunities for Gmo Resources and Boston Common
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gmo and Boston is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Resources and Boston Mon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Mon International and Gmo Resources 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 Resources are associated (or correlated) with Boston Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Mon International has no effect on the direction of Gmo Resources i.e., Gmo Resources and Boston Common go up and down completely randomly.
Pair Corralation between Gmo Resources and Boston Common
Assuming the 90 days horizon Gmo Resources is expected to generate 1.88 times more return on investment than Boston Common. However, Gmo Resources is 1.88 times more volatile than Boston Mon International. It trades about -0.01 of its potential returns per unit of risk. Boston Mon International is currently generating about -0.25 per unit of risk. If you would invest 2,043 in Gmo Resources on August 29, 2024 and sell it today you would lose (9.00) from holding Gmo Resources or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Resources vs. Boston Mon International
Performance |
| Timeline |
| Gmo Resources |
| Boston Mon International |
Gmo Resources and Boston Common Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Resources and Boston Common
The main advantage of trading using opposite Gmo Resources and Boston Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Resources position performs unexpectedly, Boston Common 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 Boston Common will offset losses from the drop in Boston Common's long position.The idea behind Gmo Resources and Boston Mon International 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.| Boston Common vs. Gmo Resources | Boston Common vs. Energy Services Fund | Boston Common vs. Tortoise Energy Independence | Boston Common vs. Oil Gas Ultrasector |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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