Correlation Between Gmo Emerging and Gmo Implementation

Can any of the company-specific risk be diversified away by investing in both Gmo Emerging and Gmo Implementation 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 Gmo Emerging and Gmo Implementation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gmo Emerging Markets and Gmo Implementation Fund, you can compare the effects of market volatilities on Gmo Emerging and Gmo Implementation 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 Gmo Emerging with a short position of Gmo Implementation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Emerging and Gmo Implementation.

Diversification Opportunities for Gmo Emerging and Gmo Implementation

0.9

Correlation Coefficient

Gmo Emerging  Gmo Implementation

Almost no diversification

The 3 months correlation between Gmo and Gmo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Emerging Markets and Gmo Implementation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Implementation and Gmo Emerging 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 Gmo Emerging Markets are associated (or correlated) with Gmo Implementation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Implementation has no effect on the direction of Gmo Emerging i.e., Gmo Emerging and Gmo Implementation go up and down completely randomly.

Pair Corralation between Gmo Emerging and Gmo Implementation

Assuming the 90 days horizon Gmo Emerging Markets is expected to generate 1.61 times more return on investment than Gmo Implementation. However, Gmo Emerging is 1.61 times more volatile than Gmo Implementation Fund. It trades about 0.3 of its potential returns per unit of risk. Gmo Implementation Fund is currently generating about 0.22 per unit of risk. If you would invest  2,424  in Gmo Emerging Markets on February 29, 2024 and sell it today you would earn a total of  98.00  from holding Gmo Emerging Markets or generate 4.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Gmo Emerging Markets  vs.  Gmo Implementation Fund

Gmo Emerging Markets

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Emerging Markets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Gmo Emerging may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Gmo Implementation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Implementation Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo Implementation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gmo Emerging and Gmo Implementation

The main advantage of trading using opposite Gmo Emerging and Gmo Implementation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Emerging position performs unexpectedly, Gmo Implementation 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 Implementation will offset losses from the drop in Gmo Implementation's long position.

The idea behind Gmo Emerging Markets and Gmo Implementation Fund 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.