Correlation Between Gmo High and Ultra Fund
Can any of the company-specific risk be diversified away by investing in both Gmo High and Ultra Fund 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 Ultra Fund 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 Ultra Fund R5, you can compare the effects of market volatilities on Gmo High and Ultra Fund 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 Ultra Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Ultra Fund.
Diversification Opportunities for Gmo High and Ultra Fund
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Ultra is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Ultra Fund R5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund R5 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 Ultra Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Fund R5 has no effect on the direction of Gmo High i.e., Gmo High and Ultra Fund go up and down completely randomly.
Pair Corralation between Gmo High and Ultra Fund
Assuming the 90 days horizon Gmo High is expected to generate 2.27 times less return on investment than Ultra Fund. But when comparing it to its historical volatility, Gmo High Yield is 3.78 times less risky than Ultra Fund. It trades about 0.17 of its potential returns per unit of risk. Ultra Fund R5 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,494 in Ultra Fund R5 on September 12, 2024 and sell it today you would earn a total of 3,078 from holding Ultra Fund R5 or generate 41.07% 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. Ultra Fund R5
Performance |
| Timeline |
| Gmo High Yield |
| Ultra Fund R5 |
Gmo High and Ultra Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Ultra Fund
The main advantage of trading using opposite Gmo High and Ultra Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Ultra Fund 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 Ultra Fund will offset losses from the drop in Ultra Fund's long position.| Gmo High vs. Artisan High Income | Gmo High vs. Blackrock High Yield | Gmo High vs. Pax High Yield | Gmo High vs. Msift High Yield |
| Ultra Fund vs. Guggenheim High Yield | Ultra Fund vs. Gmo High Yield | Ultra Fund vs. Msift High Yield | Ultra Fund vs. Virtus High Yield |
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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