Correlation Between Target Retirement and Gmo Core
Can any of the company-specific risk be diversified away by investing in both Target Retirement 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 Target Retirement and Gmo Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Gmo E Plus, you can compare the effects of market volatilities on Target Retirement 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 Target Retirement with a short position of Gmo Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Gmo Core.
Diversification Opportunities for Target Retirement and Gmo Core
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Target and Gmo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 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 Target Retirement 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 Target Retirement 2040 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 Target Retirement i.e., Target Retirement and Gmo Core go up and down completely randomly.
Pair Corralation between Target Retirement and Gmo Core
Assuming the 90 days horizon Target Retirement 2040 is expected to generate 1.53 times more return on investment than Gmo Core. However, Target Retirement is 1.53 times more volatile than Gmo E Plus. It trades about 0.13 of its potential returns per unit of risk. Gmo E Plus is currently generating about 0.08 per unit of risk. If you would invest 1,365 in Target Retirement 2040 on August 28, 2024 and sell it today you would earn a total of 20.00 from holding Target Retirement 2040 or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. Gmo E Plus
Performance |
| Timeline |
| Target Retirement 2040 |
| Gmo E Plus |
Target Retirement and Gmo Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Gmo Core
The main advantage of trading using opposite Target Retirement and Gmo Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement 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.| Target Retirement vs. Ab Municipal Bond | Target Retirement vs. Ab Bond Inflation | Target Retirement vs. Arrow Managed Futures | Target Retirement vs. Short Duration Inflation |
| Gmo Core vs. Gmo Treasury Fund | Gmo Core vs. Gmo Emerging Markets | Gmo Core vs. Gmo Emerging Markets | Gmo Core vs. Gmo Global Developed |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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