Correlation Between Gmo High and Eagle Capital
Can any of the company-specific risk be diversified away by investing in both Gmo High and Eagle Capital 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 Eagle Capital 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 Eagle Capital Appreciation, you can compare the effects of market volatilities on Gmo High and Eagle Capital 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 Eagle Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Eagle Capital.
Diversification Opportunities for Gmo High and Eagle Capital
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMO and Eagle is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Eagle Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Apprec 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 Eagle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Capital Apprec has no effect on the direction of Gmo High i.e., Gmo High and Eagle Capital go up and down completely randomly.
Pair Corralation between Gmo High and Eagle Capital
Assuming the 90 days horizon Gmo High is expected to generate 5.65 times less return on investment than Eagle Capital. But when comparing it to its historical volatility, Gmo High Yield is 5.54 times less risky than Eagle Capital. It trades about 0.35 of its potential returns per unit of risk. Eagle Capital Appreciation is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 6,304 in Eagle Capital Appreciation on September 5, 2024 and sell it today you would earn a total of 509.00 from holding Eagle Capital Appreciation or generate 8.07% 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. Eagle Capital Appreciation
Performance |
| Timeline |
| Gmo High Yield |
| Eagle Capital Apprec |
Gmo High and Eagle Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Eagle Capital
The main advantage of trading using opposite Gmo High and Eagle Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Eagle Capital 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 Eagle Capital will offset losses from the drop in Eagle Capital's long position.The idea behind Gmo High Yield and Eagle Capital Appreciation 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.| Eagle Capital vs. Chartwell Short Duration | Eagle Capital vs. Carillon Chartwell Short | Eagle Capital vs. Chartwell Short Duration | Eagle Capital vs. Carillon Chartwell Short |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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