Correlation Between Small Cap and Gmo Global
Can any of the company-specific risk be diversified away by investing in both Small Cap and Gmo Global 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 Global 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 Global Equity, you can compare the effects of market volatilities on Small Cap and Gmo Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Gmo Global.
Diversification Opportunities for Small Cap and Gmo Global
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Small and Gmo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Gmo Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Equity 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Global Equity has no effect on the direction of Small Cap i.e., Small Cap and Gmo Global go up and down completely randomly.
Pair Corralation between Small Cap and Gmo Global
Assuming the 90 days horizon Small Cap Equity is expected to generate 1.41 times more return on investment than Gmo Global. However, Small Cap is 1.41 times more volatile than Gmo Global Equity. It trades about 0.26 of its potential returns per unit of risk. Gmo Global Equity is currently generating about 0.36 per unit of risk. If you would invest 1,784 in Small Cap Equity on November 2, 2024 and sell it today you would earn a total of 81.00 from holding Small Cap Equity or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Gmo Global Equity
Performance |
| Timeline |
| Small Cap Equity |
| Gmo Global Equity |
Small Cap and Gmo Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Gmo Global
The main advantage of trading using opposite Small Cap and Gmo Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Gmo Global 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 Global will offset losses from the drop in Gmo Global's long position.| Small Cap vs. Precious Metals And | Small Cap vs. Deutsche Gold Precious | Small Cap vs. Precious Metals Fund | Small Cap vs. Invesco Gold Special |
| Gmo Global vs. Oppenheimer Global Allocation | Gmo Global vs. Pnc Balanced Allocation | Gmo Global vs. Guidemark Large Cap | Gmo Global vs. Upright Assets 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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