Correlation Between Gmo High and Investment Grade
Can any of the company-specific risk be diversified away by investing in both Gmo High and Investment Grade 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 Investment Grade 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 Investment Grade Porate, you can compare the effects of market volatilities on Gmo High and Investment Grade 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 Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Investment Grade.
Diversification Opportunities for Gmo High and Investment Grade
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gmo and Investment is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Investment Grade Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Porate 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 Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Porate has no effect on the direction of Gmo High i.e., Gmo High and Investment Grade go up and down completely randomly.
Pair Corralation between Gmo High and Investment Grade
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.5 times more return on investment than Investment Grade. However, Gmo High Yield is 1.99 times less risky than Investment Grade. It trades about 0.22 of its potential returns per unit of risk. Investment Grade Porate is currently generating about 0.08 per unit of risk. If you would invest 1,787 in Gmo High Yield on August 28, 2024 and sell it today you would earn a total of 16.00 from holding Gmo High Yield or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Gmo High Yield vs. Investment Grade Porate
Performance |
| Timeline |
| Gmo High Yield |
| Investment Grade Porate |
Gmo High and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Investment Grade
The main advantage of trading using opposite Gmo High and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Investment Grade 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 Investment Grade will offset losses from the drop in Investment Grade's long position.| Gmo High vs. Ab Government Exchange | Gmo High vs. Dunham Porategovernment Bond | Gmo High vs. Lord Abbett Government | Gmo High vs. Virtus Seix Government |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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