Correlation Between Gmo E and Gmo Alternative
Can any of the company-specific risk be diversified away by investing in both Gmo E and Gmo Alternative 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 E and Gmo Alternative 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 Gmo Alternative Allocation, you can compare the effects of market volatilities on Gmo E and Gmo Alternative 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 E with a short position of Gmo Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Gmo Alternative.
Diversification Opportunities for Gmo E and Gmo Alternative
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gmo and Gmo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo Alternative Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Alternative Allo and Gmo E 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 Gmo Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Alternative Allo has no effect on the direction of Gmo E i.e., Gmo E and Gmo Alternative go up and down completely randomly.
Pair Corralation between Gmo E and Gmo Alternative
Assuming the 90 days horizon Gmo E Plus is expected to generate 0.87 times more return on investment than Gmo Alternative. However, Gmo E Plus is 1.15 times less risky than Gmo Alternative. It trades about -0.08 of its potential returns per unit of risk. Gmo Alternative Allocation is currently generating about -0.2 per unit of risk. If you would invest 1,775 in Gmo E Plus on August 25, 2024 and sell it today you would lose (10.00) from holding Gmo E Plus or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo E Plus vs. Gmo Alternative Allocation
Performance |
| Timeline |
| Gmo E Plus |
| Gmo Alternative Allo |
Gmo E and Gmo Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo E and Gmo Alternative
The main advantage of trading using opposite Gmo E and Gmo Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo E position performs unexpectedly, Gmo Alternative 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 Alternative will offset losses from the drop in Gmo Alternative's long position.| Gmo E vs. Gmo Treasury Fund | Gmo E vs. Gmo Emerging Markets | Gmo E vs. Gmo Emerging Markets | Gmo E vs. Gmo Global Developed |
| Gmo Alternative vs. Gmo E Plus | Gmo Alternative vs. Gmo Trust | Gmo Alternative vs. Gmo Small Cap | Gmo Alternative vs. Gmo International Opportunistic |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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