Correlation Between Rmb International and Gmo Resources
Can any of the company-specific risk be diversified away by investing in both Rmb International 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 Rmb International and Gmo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rmb International Fund and Gmo Resources, you can compare the effects of market volatilities on Rmb International 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 Rmb International with a short position of Gmo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb International and Gmo Resources.
Diversification Opportunities for Rmb International and Gmo Resources
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rmb and Gmo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rmb International Fund and Gmo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and Rmb 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 Rmb International Fund 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 Rmb International i.e., Rmb International and Gmo Resources go up and down completely randomly.
Pair Corralation between Rmb International and Gmo Resources
Assuming the 90 days horizon Rmb International Fund is expected to generate 0.58 times more return on investment than Gmo Resources. However, Rmb International Fund is 1.72 times less risky than Gmo Resources. It trades about 0.03 of its potential returns per unit of risk. Gmo Resources is currently generating about -0.01 per unit of risk. If you would invest 861.00 in Rmb International Fund on August 30, 2024 and sell it today you would earn a total of 111.00 from holding Rmb International Fund or generate 12.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rmb International Fund vs. Gmo Resources
Performance |
| Timeline |
| Rmb International |
| Gmo Resources |
Rmb International and Gmo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rmb International and Gmo Resources
The main advantage of trading using opposite Rmb International and Gmo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rmb International 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.| Rmb International vs. Gmo Resources | Rmb International vs. Goldman Sachs Mlp | Rmb International vs. Oil Gas Ultrasector | Rmb International vs. Guinness Atkinson Alternative |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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