Correlation Between Short-term Government and Gmo Asset
Can any of the company-specific risk be diversified away by investing in both Short-term Government and Gmo Asset 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 Short-term Government and Gmo Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Gmo Asset Allocation, you can compare the effects of market volatilities on Short-term Government and Gmo Asset 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 Short-term Government with a short position of Gmo Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Gmo Asset.
Diversification Opportunities for Short-term Government and Gmo Asset
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Short-term and Gmo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Gmo Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Asset Allocation and Short-term Government 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 Short Term Government Fund are associated (or correlated) with Gmo Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Asset Allocation has no effect on the direction of Short-term Government i.e., Short-term Government and Gmo Asset go up and down completely randomly.
Pair Corralation between Short-term Government and Gmo Asset
Assuming the 90 days horizon Short Term Government Fund is expected to generate 0.12 times more return on investment than Gmo Asset. However, Short Term Government Fund is 8.35 times less risky than Gmo Asset. It trades about 0.1 of its potential returns per unit of risk. Gmo Asset Allocation is currently generating about 0.01 per unit of risk. If you would invest 865.00 in Short Term Government Fund on September 4, 2024 and sell it today you would earn a total of 29.00 from holding Short Term Government Fund or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Short Term Government Fund vs. Gmo Asset Allocation
Performance |
| Timeline |
| Short Term Government |
| Gmo Asset Allocation |
Short-term Government and Gmo Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Gmo Asset
The main advantage of trading using opposite Short-term Government and Gmo Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government position performs unexpectedly, Gmo Asset 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 Asset will offset losses from the drop in Gmo Asset's long position.The idea behind Short Term Government Fund and Gmo Asset Allocation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Gmo Asset vs. Short Term Government Fund | Gmo Asset vs. Dreyfus Government Cash | Gmo Asset vs. Us Government Securities | Gmo Asset vs. Franklin Adjustable Government |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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