Correlation Between Gmo International and Gmo Emerging
Can any of the company-specific risk be diversified away by investing in both Gmo International and Gmo Emerging 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 International and Gmo Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo International Opportunistic and Gmo Emerging Markets, you can compare the effects of market volatilities on Gmo International and Gmo Emerging 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 International with a short position of Gmo Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo International and Gmo Emerging.
Diversification Opportunities for Gmo International and Gmo Emerging
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gmo and Gmo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Opportunisti and Gmo Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Emerging Markets and Gmo International 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 International Opportunistic are associated (or correlated) with Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Markets has no effect on the direction of Gmo International i.e., Gmo International and Gmo Emerging go up and down completely randomly.
Pair Corralation between Gmo International and Gmo Emerging
Assuming the 90 days horizon Gmo International Opportunistic is expected to under-perform the Gmo Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo International Opportunistic is 1.06 times less risky than Gmo Emerging. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Gmo Emerging Markets is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,495 in Gmo Emerging Markets on August 29, 2024 and sell it today you would lose (62.00) from holding Gmo Emerging Markets or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo International Opportunisti vs. Gmo Emerging Markets
Performance |
| Timeline |
| Gmo International |
| Gmo Emerging Markets |
Gmo International and Gmo Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo International and Gmo Emerging
The main advantage of trading using opposite Gmo International and Gmo Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo International position performs unexpectedly, Gmo Emerging 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 Emerging will offset losses from the drop in Gmo Emerging's long position.| Gmo International vs. Vanguard High Yield Tax Exempt | Gmo International vs. Calamos Dynamic Convertible | Gmo International vs. T Rowe Price | Gmo International vs. Dreyfusstandish Global Fixed |
| Gmo Emerging vs. Small Cap Equity | Gmo Emerging vs. Rbc Ultra Short Fixed | Gmo Emerging vs. Cutler Equity | Gmo Emerging vs. Balanced Fund Retail |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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