Correlation Between Gmo E and Gmo International
Can any of the company-specific risk be diversified away by investing in both Gmo E and Gmo International 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 International 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 International Equity, you can compare the effects of market volatilities on Gmo E and Gmo International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Gmo International.
Diversification Opportunities for Gmo E and Gmo International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Gmo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo International Equity 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo International Equity has no effect on the direction of Gmo E i.e., Gmo E and Gmo International go up and down completely randomly.
Pair Corralation between Gmo E and Gmo International
Assuming the 90 days horizon Gmo E is expected to generate 3.84 times less return on investment than Gmo International. But when comparing it to its historical volatility, Gmo E Plus is 2.0 times less risky than Gmo International. It trades about 0.04 of its potential returns per unit of risk. Gmo International Equity is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,877 in Gmo International Equity on September 12, 2024 and sell it today you would earn a total of 647.00 from holding Gmo International Equity or generate 34.47% 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 International Equity
Performance |
| Timeline |
| Gmo E Plus |
| Gmo International Equity |
Gmo E and Gmo International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo E and Gmo International
The main advantage of trading using opposite Gmo E and Gmo International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo E position performs unexpectedly, Gmo International 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 International will offset losses from the drop in Gmo International's long position.| Gmo E vs. Gmo Trust | Gmo E vs. Gmo Small Cap | Gmo E vs. Gmo International Opportunistic | Gmo E vs. Gmo Quality Cyclicals |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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