Correlation Between Sp Midcap and Gmo Small
Can any of the company-specific risk be diversified away by investing in both Sp Midcap and Gmo Small 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 Sp Midcap and Gmo Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Midcap Index and Gmo Small Cap, you can compare the effects of market volatilities on Sp Midcap and Gmo Small 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 Sp Midcap with a short position of Gmo Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Gmo Small.
Diversification Opportunities for Sp Midcap and Gmo Small
Poor diversification
The 3 months correlation between SPMIX and Gmo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Gmo Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Sp Midcap i.e., Sp Midcap and Gmo Small go up and down completely randomly.
Pair Corralation between Sp Midcap and Gmo Small
Assuming the 90 days horizon Sp Midcap is expected to generate 1.07 times less return on investment than Gmo Small. But when comparing it to its historical volatility, Sp Midcap Index is 1.24 times less risky than Gmo Small. It trades about 0.2 of its potential returns per unit of risk. Gmo Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,070 in Gmo Small Cap on November 8, 2024 and sell it today you would earn a total of 77.00 from holding Gmo Small Cap or generate 3.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Midcap Index vs. Gmo Small Cap
Performance |
| Timeline |
| Sp Midcap Index |
| Gmo Small Cap |
Sp Midcap and Gmo Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Midcap and Gmo Small
The main advantage of trading using opposite Sp Midcap and Gmo Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap position performs unexpectedly, Gmo Small 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 Small will offset losses from the drop in Gmo Small's long position.| Sp Midcap vs. Old Westbury Fixed | Sp Midcap vs. Enhanced Fixed Income | Sp Midcap vs. Nuveen Core Equity | Sp Midcap vs. Artisan Select Equity |
| Gmo Small vs. The Hartford Growth | Gmo Small vs. Stringer Growth Fund | Gmo Small vs. Growth Allocation Fund | Gmo Small vs. Transamerica Capital Growth |
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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