Correlation Between Gmo Alternative and Fpa Crescent

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

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

Diversification Opportunities for Gmo Alternative and Fpa Crescent

-0.33

Correlation Coefficient

Gmo Alternative  Fpa Crescent

Very good diversification

The 3 months correlation between Gmo and Fpa is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation and Fpa Crescent Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fpa Crescent and Gmo Alternative 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 Alternative Allocation are associated (or correlated) with Fpa Crescent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fpa Crescent has no effect on the direction of Gmo Alternative i.e., Gmo Alternative and Fpa Crescent go up and down completely randomly.

Pair Corralation between Gmo Alternative and Fpa Crescent

Assuming the 90 days horizon Gmo Alternative is expected to generate 5.2 times less return on investment than Fpa Crescent. But when comparing it to its historical volatility, Gmo Alternative Allocation is 2.01 times less risky than Fpa Crescent. It trades about 0.03 of its potential returns per unit of risk. Fpa Crescent Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,384  in Fpa Crescent Fund on August 22, 2024 and sell it today you would earn a total of  879.00  from holding Fpa Crescent Fund or generate 25.98% return on investment over 90 days.

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

Gmo Alternative Allocation  vs.  Fpa Crescent Fund

Gmo Alternative Allo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Alternative Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gmo Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fpa Crescent

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fpa Crescent Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fpa Crescent 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 Alternative and Fpa Crescent

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

The idea behind Gmo Alternative Allocation and Fpa Crescent 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.