Correlation Between Gmo E and Gmo Global
Can any of the company-specific risk be diversified away by investing in both Gmo E and Gmo Global 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 Global 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 Global Asset, you can compare the effects of market volatilities on Gmo E and Gmo Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Gmo Global.
Diversification Opportunities for Gmo E and Gmo Global
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Gmo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo Global Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Asset 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Global Asset has no effect on the direction of Gmo E i.e., Gmo E and Gmo Global go up and down completely randomly.
Pair Corralation between Gmo E and Gmo Global
Assuming the 90 days horizon Gmo E is expected to generate 2.2 times less return on investment than Gmo Global. But when comparing it to its historical volatility, Gmo E Plus is 1.51 times less risky than Gmo Global. It trades about 0.04 of its potential returns per unit of risk. Gmo Global Asset is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,147 in Gmo Global Asset on September 14, 2024 and sell it today you would earn a total of 253.00 from holding Gmo Global Asset or generate 8.04% 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 Global Asset
Performance |
| Timeline |
| Gmo E Plus |
| Gmo Global Asset |
Gmo E and Gmo Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo E and Gmo Global
The main advantage of trading using opposite Gmo E and Gmo Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo E position performs unexpectedly, Gmo Global 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 Global will offset losses from the drop in Gmo Global's long position.| Gmo E vs. Kinetics Global Fund | Gmo E vs. Morningstar Global Income | Gmo E vs. Investec Global Franchise | Gmo E vs. Ab Global Bond |
| Gmo Global vs. Gamco Natural Resources | Gmo Global vs. Thrivent Natural Resources | Gmo Global vs. Jennison Natural Resources | Gmo Global vs. Gmo Resources |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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