Correlation Between Gmo E and Gmo Trust
Can any of the company-specific risk be diversified away by investing in both Gmo E and Gmo Trust 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 Trust 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 Trust , you can compare the effects of market volatilities on Gmo E and Gmo Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Gmo Trust.
Diversification Opportunities for Gmo E and Gmo Trust
Very weak diversification
The 3 months correlation between Gmo and Gmo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Gmo Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Trust has no effect on the direction of Gmo E i.e., Gmo E and Gmo Trust go up and down completely randomly.
Pair Corralation between Gmo E and Gmo Trust
Assuming the 90 days horizon Gmo E Plus is expected to generate 0.53 times more return on investment than Gmo Trust. However, Gmo E Plus is 1.88 times less risky than Gmo Trust. It trades about -0.24 of its potential returns per unit of risk. Gmo Trust is currently generating about -0.35 per unit of risk. If you would invest 1,777 in Gmo E Plus on September 27, 2024 and sell it today you would lose (94.00) from holding Gmo E Plus or give up 5.29% 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 Trust
Performance |
| Timeline |
| Gmo E Plus |
| Gmo Trust |
Gmo E and Gmo Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo E and Gmo Trust
The main advantage of trading using opposite Gmo E and Gmo Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo E position performs unexpectedly, Gmo Trust 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 Trust will offset losses from the drop in Gmo Trust's long position.The idea behind Gmo E Plus and Gmo Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Gmo Trust vs. Gmo E Plus | Gmo Trust vs. Gmo Trust | Gmo Trust vs. Gmo Treasury Fund | Gmo Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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