Correlation Between Money Market and Gmo Equity
Can any of the company-specific risk be diversified away by investing in both Money Market and Gmo Equity 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 Money Market and Gmo Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Money Market Obligations and Gmo Equity Allocation, you can compare the effects of market volatilities on Money Market and Gmo Equity 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 Money Market with a short position of Gmo Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and Gmo Equity.
Diversification Opportunities for Money Market and Gmo Equity
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Money and Gmo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations and Gmo Equity Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Equity Allocation and Money Market 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 Money Market Obligations are associated (or correlated) with Gmo Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Equity Allocation has no effect on the direction of Money Market i.e., Money Market and Gmo Equity go up and down completely randomly.
Pair Corralation between Money Market and Gmo Equity
Assuming the 90 days horizon Money Market is expected to generate 4.04 times less return on investment than Gmo Equity. But when comparing it to its historical volatility, Money Market Obligations is 2.99 times less risky than Gmo Equity. It trades about 0.04 of its potential returns per unit of risk. Gmo Equity Allocation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,270 in Gmo Equity Allocation on September 1, 2024 and sell it today you would earn a total of 212.00 from holding Gmo Equity Allocation or generate 16.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Money Market Obligations vs. Gmo Equity Allocation
Performance |
| Timeline |
| Money Market Obligations |
| Gmo Equity Allocation |
Money Market and Gmo Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Money Market and Gmo Equity
The main advantage of trading using opposite Money Market and Gmo Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market position performs unexpectedly, Gmo Equity 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 Equity will offset losses from the drop in Gmo Equity's long position.| Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard 500 Index | Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard Total Stock |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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