Correlation Between Gmo Core and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Gmo Core and Old Westbury 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 Old Westbury 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 Old Westbury Fixed, you can compare the effects of market volatilities on Gmo Core and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Core and Old Westbury.
Diversification Opportunities for Gmo Core and Old Westbury
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Gmo and Old is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Old Westbury Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Fixed 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Fixed has no effect on the direction of Gmo Core i.e., Gmo Core and Old Westbury go up and down completely randomly.
Pair Corralation between Gmo Core and Old Westbury
Assuming the 90 days horizon Gmo E Plus is expected to generate 1.47 times more return on investment than Old Westbury. However, Gmo Core is 1.47 times more volatile than Old Westbury Fixed. It trades about 0.08 of its potential returns per unit of risk. Old Westbury Fixed is currently generating about 0.04 per unit of risk. If you would invest 1,778 in Gmo E Plus on August 28, 2024 and sell it today you would earn a total of 11.00 from holding Gmo E Plus or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo E Plus vs. Old Westbury Fixed
Performance |
| Timeline |
| Gmo E Plus |
| Old Westbury Fixed |
Gmo Core and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Core and Old Westbury
The main advantage of trading using opposite Gmo Core and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Core position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| Gmo Core vs. Gmo Treasury Fund | Gmo Core vs. Gmo Emerging Markets | Gmo Core vs. Gmo Emerging Markets | Gmo Core vs. Gmo Global Developed |
| Old Westbury vs. Old Westbury All | Old Westbury vs. Old Westbury California | Old Westbury vs. Old Westbury Credit | Old Westbury vs. Old Westbury Large |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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