Correlation Between Energy Services and Gmo Core
Can any of the company-specific risk be diversified away by investing in both Energy Services and Gmo Core 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 Energy Services and Gmo Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Gmo E Plus, you can compare the effects of market volatilities on Energy Services and Gmo Core 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 Energy Services with a short position of Gmo Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Gmo Core.
Diversification Opportunities for Energy Services and Gmo Core
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Energy and Gmo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Gmo E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo E Plus and Energy Services 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 Energy Services Fund are associated (or correlated) with Gmo Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo E Plus has no effect on the direction of Energy Services i.e., Energy Services and Gmo Core go up and down completely randomly.
Pair Corralation between Energy Services and Gmo Core
Assuming the 90 days horizon Energy Services Fund is expected to generate 6.75 times more return on investment than Gmo Core. However, Energy Services is 6.75 times more volatile than Gmo E Plus. It trades about 0.22 of its potential returns per unit of risk. Gmo E Plus is currently generating about 0.16 per unit of risk. If you would invest 22,294 in Energy Services Fund on September 3, 2024 and sell it today you would earn a total of 2,333 from holding Energy Services Fund or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Gmo E Plus
Performance |
| Timeline |
| Energy Services |
| Gmo E Plus |
Energy Services and Gmo Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Gmo Core
The main advantage of trading using opposite Energy Services and Gmo Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Gmo Core 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 Core will offset losses from the drop in Gmo Core's long position.| Energy Services vs. Energy Fund Investor | Energy Services vs. Basic Materials Fund | Energy Services vs. Electronics Fund Investor | Energy Services vs. Health Care Fund |
| Gmo Core vs. Vanguard Financials Index | Gmo Core vs. Gabelli Global Financial | Gmo Core vs. Davis Financial Fund | Gmo Core vs. 1919 Financial Services |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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