Correlation Between Gmo Core and Large Cap
Can any of the company-specific risk be diversified away by investing in both Gmo Core and Large Cap 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 Core and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo E Plus and Large Cap Growth, you can compare the effects of market volatilities on Gmo Core and Large Cap 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 Core with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Core and Large Cap.
Diversification Opportunities for Gmo Core and Large Cap
Excellent diversification
The 3 months correlation between Gmo and Large is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Gmo Core 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 E Plus are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Gmo Core i.e., Gmo Core and Large Cap go up and down completely randomly.
Pair Corralation between Gmo Core and Large Cap
Assuming the 90 days horizon Gmo Core is expected to generate 7.16 times less return on investment than Large Cap. But when comparing it to its historical volatility, Gmo E Plus is 2.83 times less risky than Large Cap. It trades about 0.08 of its potential returns per unit of risk. Large Cap Growth is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,608 in Large Cap Growth on August 31, 2024 and sell it today you would earn a total of 162.00 from holding Large Cap Growth or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo E Plus vs. Large Cap Growth
Performance |
| Timeline |
| Gmo E Plus |
| Large Cap Growth |
Gmo Core and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Core and Large Cap
The main advantage of trading using opposite Gmo Core and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Core position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| Gmo Core vs. Alger Health Sciences | Gmo Core vs. The Gabelli Healthcare | Gmo Core vs. Health Care Fund | Gmo Core vs. Alphacentric Lifesci Healthcare |
| Large Cap vs. Large Cap E | Large Cap vs. International Fund International | Large Cap vs. Parnassus Endeavor Fund | Large Cap vs. Parnassus E Equity |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |