Correlation Between Gmo Small and Riverfront Dynamic

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

By analyzing existing cross correlation between Gmo Small Cap and Riverfront Dynamic Equity, you can compare the effects of market volatilities on Gmo Small and Riverfront Dynamic 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 Small with a short position of Riverfront Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and Riverfront Dynamic.

Diversification Opportunities for Gmo Small and Riverfront Dynamic

0.93

Correlation Coefficient

Gmo Small  Riverfront Dynamic

Almost no diversification

The 3 months correlation between Gmo and Riverfront is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and Riverfront Dynamic Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverfront Dynamic Equity and Gmo Small 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 Small Cap are associated (or correlated) with Riverfront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverfront Dynamic Equity has no effect on the direction of Gmo Small i.e., Gmo Small and Riverfront Dynamic go up and down completely randomly.

Pair Corralation between Gmo Small and Riverfront Dynamic

Assuming the 90 days horizon Gmo Small Cap is expected to generate 2.62 times more return on investment than Riverfront Dynamic. However, Gmo Small is 2.62 times more volatile than Riverfront Dynamic Equity. It trades about 0.12 of its potential returns per unit of risk. Riverfront Dynamic Equity is currently generating about 0.23 per unit of risk. If you would invest  1,902  in Gmo Small Cap on May 5, 2025 and sell it today you would earn a total of  160.00  from holding Gmo Small Cap or generate 8.41% return on investment over 90 days.

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

Gmo Small Cap  vs.  Riverfront Dynamic Equity

Gmo Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Riverfront Dynamic Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Riverfront Dynamic Equity are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Riverfront Dynamic may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Gmo Small and Riverfront Dynamic

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

The idea behind Gmo Small Cap and Riverfront Dynamic Equity 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.