Correlation Between Ab Small and Gmo Equity
Can any of the company-specific risk be diversified away by investing in both Ab Small and Gmo Equity 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 Ab Small and Gmo Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Small Cap and Gmo Equity Allocation, you can compare the effects of market volatilities on Ab Small and Gmo Equity 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 Ab Small with a short position of Gmo Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Gmo Equity.
Diversification Opportunities for Ab Small and Gmo Equity
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SCYVX and Gmo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Gmo Equity Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Equity Allocation and Ab Small 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 Ab Small Cap are associated (or correlated) with Gmo Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Equity Allocation has no effect on the direction of Ab Small i.e., Ab Small and Gmo Equity go up and down completely randomly.
Pair Corralation between Ab Small and Gmo Equity
Assuming the 90 days horizon Ab Small Cap is expected to generate 0.4 times more return on investment than Gmo Equity. However, Ab Small Cap is 2.52 times less risky than Gmo Equity. It trades about 0.06 of its potential returns per unit of risk. Gmo Equity Allocation is currently generating about -0.19 per unit of risk. If you would invest 1,612 in Ab Small Cap on September 13, 2024 and sell it today you would earn a total of 16.00 from holding Ab Small Cap or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Small Cap vs. Gmo Equity Allocation
Performance |
| Timeline |
| Ab Small Cap |
| Gmo Equity Allocation |
Ab Small and Gmo Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Small and Gmo Equity
The main advantage of trading using opposite Ab Small and Gmo Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small position performs unexpectedly, Gmo Equity 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 Equity will offset losses from the drop in Gmo Equity's long position.| Ab Small vs. American Century Etf | Ab Small vs. Valic Company I | Ab Small vs. Northern Small Cap | Ab Small vs. Small Cap Value Fund |
| Gmo Equity vs. Gmo E Plus | Gmo Equity vs. Gmo Trust | Gmo Equity vs. Gmo Treasury Fund | Gmo Equity 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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