Correlation Between Gmo E and Gmo Strategic
Can any of the company-specific risk be diversified away by investing in both Gmo E and Gmo Strategic 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 Strategic 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 Strategic Opportunities, you can compare the effects of market volatilities on Gmo E and Gmo Strategic 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 Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Gmo Strategic.
Diversification Opportunities for Gmo E and Gmo Strategic
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Gmo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo Strategic Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Strategic Opport 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Strategic Opport has no effect on the direction of Gmo E i.e., Gmo E and Gmo Strategic go up and down completely randomly.
Pair Corralation between Gmo E and Gmo Strategic
Assuming the 90 days horizon Gmo E is expected to generate 2.48 times less return on investment than Gmo Strategic. But when comparing it to its historical volatility, Gmo E Plus is 1.36 times less risky than Gmo Strategic. It trades about 0.05 of its potential returns per unit of risk. Gmo Strategic Opportunities is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,493 in Gmo Strategic Opportunities on August 31, 2024 and sell it today you would earn a total of 261.00 from holding Gmo Strategic Opportunities or generate 17.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo E Plus vs. Gmo Strategic Opportunities
Performance |
| Timeline |
| Gmo E Plus |
| Gmo Strategic Opport |
Gmo E and Gmo Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo E and Gmo Strategic
The main advantage of trading using opposite Gmo E and Gmo Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo E position performs unexpectedly, Gmo Strategic 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 Strategic will offset losses from the drop in Gmo Strategic's long position.| Gmo E vs. Origin Emerging Markets | Gmo E vs. Transamerica Emerging Markets | Gmo E vs. Investec Emerging Markets | Gmo E vs. Pace International Emerging |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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