Correlation Between Prudential Government and Gmo Global
Can any of the company-specific risk be diversified away by investing in both Prudential Government 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 Prudential Government and Gmo Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Government Income and Gmo Global Developed, you can compare the effects of market volatilities on Prudential Government 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 Prudential Government with a short position of Gmo Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Gmo Global.
Diversification Opportunities for Prudential Government and Gmo Global
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prudential and Gmo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Gmo Global Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Developed and Prudential Government 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 Prudential Government Income 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 Developed has no effect on the direction of Prudential Government i.e., Prudential Government and Gmo Global go up and down completely randomly.
Pair Corralation between Prudential Government and Gmo Global
Assuming the 90 days horizon Prudential Government Income is expected to generate 0.59 times more return on investment than Gmo Global. However, Prudential Government Income is 1.68 times less risky than Gmo Global. It trades about 0.1 of its potential returns per unit of risk. Gmo Global Developed is currently generating about -0.02 per unit of risk. If you would invest 785.00 in Prudential Government Income on September 12, 2024 and sell it today you would earn a total of 5.00 from holding Prudential Government Income or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Government Income vs. Gmo Global Developed
Performance |
| Timeline |
| Prudential Government |
| Gmo Global Developed |
Prudential Government and Gmo Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Gmo Global
The main advantage of trading using opposite Prudential Government and Gmo Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government 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.The idea behind Prudential Government Income and Gmo Global Developed 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 Global vs. Prudential Government Income | Gmo Global vs. Intermediate Government Bond | Gmo Global vs. Franklin Adjustable Government | Gmo Global vs. Inverse Government Long |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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