Correlation Between Gmo High and Ab Discovery
Can any of the company-specific risk be diversified away by investing in both Gmo High and Ab Discovery 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 High and Ab Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Ab Discovery Value, you can compare the effects of market volatilities on Gmo High and Ab Discovery 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 High with a short position of Ab Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Ab Discovery.
Diversification Opportunities for Gmo High and Ab Discovery
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMO and ABCSX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Ab Discovery Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Discovery Value and Gmo High 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 High Yield are associated (or correlated) with Ab Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Discovery Value has no effect on the direction of Gmo High i.e., Gmo High and Ab Discovery go up and down completely randomly.
Pair Corralation between Gmo High and Ab Discovery
Assuming the 90 days horizon Gmo High is expected to generate 2.36 times less return on investment than Ab Discovery. But when comparing it to its historical volatility, Gmo High Yield is 5.6 times less risky than Ab Discovery. It trades about 0.23 of its potential returns per unit of risk. Ab Discovery Value is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,808 in Ab Discovery Value on September 5, 2024 and sell it today you would earn a total of 268.00 from holding Ab Discovery Value or generate 14.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Ab Discovery Value
Performance |
| Timeline |
| Gmo High Yield |
| Ab Discovery Value |
Gmo High and Ab Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Ab Discovery
The main advantage of trading using opposite Gmo High and Ab Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Ab Discovery 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 Ab Discovery will offset losses from the drop in Ab Discovery's long position.The idea behind Gmo High Yield and Ab Discovery Value 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.| Ab Discovery vs. Gmo High Yield | Ab Discovery vs. Calamos Dynamic Convertible | Ab Discovery vs. Touchstone Premium Yield | Ab Discovery vs. Versatile Bond Portfolio |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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