Correlation Between Gmo Resources and Energy Services
Can any of the company-specific risk be diversified away by investing in both Gmo Resources and Energy Services 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 Energy Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Resources and Energy Services Fund, you can compare the effects of market volatilities on Gmo Resources and Energy Services 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 Energy Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Resources and Energy Services.
Diversification Opportunities for Gmo Resources and Energy Services
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gmo and ENERGY is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Resources and Energy Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services 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 Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Gmo Resources i.e., Gmo Resources and Energy Services go up and down completely randomly.
Pair Corralation between Gmo Resources and Energy Services
Assuming the 90 days horizon Gmo Resources is expected to under-perform the Energy Services. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo Resources is 1.76 times less risky than Energy Services. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Energy Services Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 22,290 in Energy Services Fund on August 29, 2024 and sell it today you would earn a total of 2,105 from holding Energy Services Fund or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Gmo Resources vs. Energy Services Fund
Performance |
| Timeline |
| Gmo Resources |
| Energy Services |
Gmo Resources and Energy Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Resources and Energy Services
The main advantage of trading using opposite Gmo Resources and Energy Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Resources position performs unexpectedly, Energy Services 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 Energy Services will offset losses from the drop in Energy Services' long position.The idea behind Gmo Resources and Energy Services Fund 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.| Energy Services vs. Fidelity Advisor Energy | Energy Services vs. Fidelity Advisor Energy | Energy Services vs. HUMANA INC | Energy Services vs. Aquagold International |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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