Correlation Between Gmo High and M Large
Can any of the company-specific risk be diversified away by investing in both Gmo High and M Large 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 M Large 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 M Large Cap, you can compare the effects of market volatilities on Gmo High and M Large 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 M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and M Large.
Diversification Opportunities for Gmo High and M Large
Poor diversification
The 3 months correlation between Gmo and MTCGX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap 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 M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Gmo High i.e., Gmo High and M Large go up and down completely randomly.
Pair Corralation between Gmo High and M Large
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.15 times more return on investment than M Large. However, Gmo High Yield is 6.53 times less risky than M Large. It trades about 0.23 of its potential returns per unit of risk. M Large Cap is currently generating about 0.02 per unit of risk. If you would invest 1,786 in Gmo High Yield on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Gmo High Yield or generate 1.01% 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. M Large Cap
Performance |
| Timeline |
| Gmo High Yield |
| M Large Cap |
Gmo High and M Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and M Large
The main advantage of trading using opposite Gmo High and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, M Large 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 M Large will offset losses from the drop in M Large's long position.| Gmo High vs. Calvert High Yield | Gmo High vs. Ppm High Yield | Gmo High vs. Ab High Income | Gmo High vs. California High Yield Municipal |
| M Large vs. Lord Abbett High | M Large vs. Artisan High Income | M Large vs. Victory High Yield | M Large vs. Gmo 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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