Correlation Between Gmo E and Gmo Asset
Can any of the company-specific risk be diversified away by investing in both Gmo E and Gmo Asset 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 Asset 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 Asset Allocation, you can compare the effects of market volatilities on Gmo E and Gmo Asset 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 Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Gmo Asset.
Diversification Opportunities for Gmo E and Gmo Asset
Almost no diversification
The 3 months correlation between Gmo and Gmo is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Asset Allocation 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Asset Allocation has no effect on the direction of Gmo E i.e., Gmo E and Gmo Asset go up and down completely randomly.
Pair Corralation between Gmo E and Gmo Asset
Assuming the 90 days horizon Gmo E is expected to generate 1.32 times less return on investment than Gmo Asset. But when comparing it to its historical volatility, Gmo E Plus is 3.25 times less risky than Gmo Asset. It trades about 0.09 of its potential returns per unit of risk. Gmo Asset Allocation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,845 in Gmo Asset Allocation on August 29, 2024 and sell it today you would earn a total of 79.00 from holding Gmo Asset Allocation or generate 4.28% 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. Gmo Asset Allocation
Performance |
| Timeline |
| Gmo E Plus |
| Gmo Asset Allocation |
Gmo E and Gmo Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo E and Gmo Asset
The main advantage of trading using opposite Gmo E and Gmo Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo E position performs unexpectedly, Gmo Asset 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 Asset will offset losses from the drop in Gmo Asset'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 Asset vs. Gmo E Plus | Gmo Asset vs. Gmo Trust | Gmo Asset vs. Gmo Treasury Fund | Gmo Asset vs. Gmo Trust |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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