Correlation Between Gmo Trust and Financial Industries
Can any of the company-specific risk be diversified away by investing in both Gmo Trust and Financial Industries 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 Trust and Financial Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo Trust and Financial Industries Fund, you can compare the effects of market volatilities on Gmo Trust and Financial Industries 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 Trust with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Trust and Financial Industries.
Diversification Opportunities for Gmo Trust and Financial Industries
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gmo and Financial is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Trust and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Gmo Trust 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 Trust are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Gmo Trust i.e., Gmo Trust and Financial Industries go up and down completely randomly.
Pair Corralation between Gmo Trust and Financial Industries
Assuming the 90 days horizon Gmo Trust is expected to generate 1.01 times less return on investment than Financial Industries. But when comparing it to its historical volatility, Gmo Trust is 1.68 times less risky than Financial Industries. It trades about 0.48 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,806 in Financial Industries Fund on October 30, 2024 and sell it today you would earn a total of 105.00 from holding Financial Industries Fund or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo Trust vs. Financial Industries Fund
Performance |
| Timeline |
| Gmo Trust |
| Financial Industries |
Gmo Trust and Financial Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo Trust and Financial Industries
The main advantage of trading using opposite Gmo Trust and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Trust position performs unexpectedly, Financial Industries 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 Financial Industries will offset losses from the drop in Financial Industries' long position.| Gmo Trust vs. Dunham High Yield | Gmo Trust vs. Guggenheim High Yield | Gmo Trust vs. T Rowe Price | Gmo Trust vs. Msift High Yield |
| Financial Industries vs. Gmo Global Equity | Financial Industries vs. Tax Managed International Equity | Financial Industries vs. Doubleline Core Fixed | Financial Industries vs. Locorr Dynamic Equity |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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