Correlation Between Small Cap and Gmo Emerging
Can any of the company-specific risk be diversified away by investing in both Small Cap and Gmo Emerging 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 Small Cap and Gmo Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Gmo Emerging Markets, you can compare the effects of market volatilities on Small Cap and Gmo Emerging 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 Small Cap with a short position of Gmo Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Gmo Emerging.
Diversification Opportunities for Small Cap and Gmo Emerging
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Gmo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Gmo Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Markets and Small Cap 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 Small Cap Equity are associated (or correlated) with Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Markets has no effect on the direction of Small Cap i.e., Small Cap and Gmo Emerging go up and down completely randomly.
Pair Corralation between Small Cap and Gmo Emerging
Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Gmo Emerging. In addition to that, Small Cap is 1.37 times more volatile than Gmo Emerging Markets. It trades about -0.27 of its total potential returns per unit of risk. Gmo Emerging Markets is currently generating about 0.25 per unit of volatility. If you would invest 2,314 in Gmo Emerging Markets on November 27, 2024 and sell it today you would earn a total of 84.00 from holding Gmo Emerging Markets or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Gmo Emerging Markets
Performance |
| Timeline |
| Small Cap Equity |
| Gmo Emerging Markets |
Small Cap and Gmo Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Gmo Emerging
The main advantage of trading using opposite Small Cap and Gmo Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Gmo Emerging 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 Gmo Emerging will offset losses from the drop in Gmo Emerging's long position.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
| Gmo Emerging vs. Morgan Stanley Institutional | Gmo Emerging vs. T Rowe Price | Gmo Emerging vs. Tfa Alphagen Growth | Gmo Emerging vs. Transamerica Asset Allocation |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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