Correlation Between Power Global and Gmo High
Can any of the company-specific risk be diversified away by investing in both Power Global and Gmo High 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 Power Global and Gmo High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Global Tactical and Gmo High Yield, you can compare the effects of market volatilities on Power Global and Gmo High 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 Power Global with a short position of Gmo High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Global and Gmo High.
Diversification Opportunities for Power Global and Gmo High
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Power and GMO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Power Global Tactical and Gmo High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo High Yield and Power Global 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 Power Global Tactical are associated (or correlated) with Gmo High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo High Yield has no effect on the direction of Power Global i.e., Power Global and Gmo High go up and down completely randomly.
Pair Corralation between Power Global and Gmo High
Assuming the 90 days horizon Power Global Tactical is expected to generate 2.18 times more return on investment than Gmo High. However, Power Global is 2.18 times more volatile than Gmo High Yield. It trades about 0.36 of its potential returns per unit of risk. Gmo High Yield is currently generating about 0.35 per unit of risk. If you would invest 1,086 in Power Global Tactical on September 5, 2024 and sell it today you would earn a total of 32.00 from holding Power Global Tactical or generate 2.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Power Global Tactical vs. Gmo High Yield
Performance |
| Timeline |
| Power Global Tactical |
| Gmo High Yield |
Power Global and Gmo High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Global and Gmo High
The main advantage of trading using opposite Power Global and Gmo High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Global position performs unexpectedly, Gmo High 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 High will offset losses from the drop in Gmo High's long position.| Power Global vs. Power Income Fund | Power Global vs. Power Income Fund | Power Global vs. Power Income Fund | Power Global vs. Power Momentum Index |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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