Correlation Between GCM Grosvenor and Great Elm

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

By analyzing existing cross correlation between GCM Grosvenor and Great Elm Capital, you can compare the effects of market volatilities on GCM Grosvenor and Great Elm 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 GCM Grosvenor with a short position of Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of GCM Grosvenor and Great Elm.

Diversification Opportunities for GCM Grosvenor and Great Elm

0.69

Correlation Coefficient

GCM Grosvenor  Great Elm

Poor diversification

The 3 months correlation between GCM and Great is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GCM Grosvenor and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital and GCM Grosvenor 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 GCM Grosvenor are associated (or correlated) with Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of GCM Grosvenor i.e., GCM Grosvenor and Great Elm go up and down completely randomly.

Pair Corralation between GCM Grosvenor and Great Elm

Given the investment horizon of 90 days GCM Grosvenor is expected to generate 2.0 times more return on investment than Great Elm. However, GCM Grosvenor is 2.0 times more volatile than Great Elm Capital. It trades about 0.36 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.35 per unit of risk. If you would invest  1,151  in GCM Grosvenor on September 15, 2024 and sell it today you would earn a total of  94.00  from holding GCM Grosvenor or generate 8.17% return on investment over 90 days.

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

GCM Grosvenor  vs.  Great Elm Capital

GCM Grosvenor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, GCM Grosvenor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Great Elm Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GCM Grosvenor and Great Elm

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

The idea behind GCM Grosvenor and Great Elm Capital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.