Correlation Between American Funds and Gmo Resources
Can any of the company-specific risk be diversified away by investing in both American Funds and Gmo Resources 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 American Funds and Gmo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2025 and Gmo Resources, you can compare the effects of market volatilities on American Funds and Gmo Resources 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 American Funds with a short position of Gmo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Gmo Resources.
Diversification Opportunities for American Funds and Gmo Resources
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Gmo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2025 and Gmo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and American Funds 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 American Funds 2025 are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of American Funds i.e., American Funds and Gmo Resources go up and down completely randomly.
Pair Corralation between American Funds and Gmo Resources
Assuming the 90 days horizon American Funds is expected to generate 2.52 times less return on investment than Gmo Resources. But when comparing it to its historical volatility, American Funds 2025 is 3.99 times less risky than Gmo Resources. It trades about 0.17 of its potential returns per unit of risk. Gmo Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,955 in Gmo Resources on September 13, 2024 and sell it today you would earn a total of 47.00 from holding Gmo Resources or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2025 vs. Gmo Resources
Performance |
| Timeline |
| American Funds 2025 |
| Gmo Resources |
American Funds and Gmo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Gmo Resources
The main advantage of trading using opposite American Funds and Gmo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Gmo Resources 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 Resources will offset losses from the drop in Gmo Resources' long position.| American Funds vs. American Funds 2030 | American Funds vs. American Funds 2020 | American Funds vs. American Funds 2035 | American Funds vs. American Funds 2045 |
| Gmo Resources vs. Gmo E Plus | Gmo Resources vs. Gmo Trust | Gmo Resources vs. Gmo Treasury Fund | Gmo Resources 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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