Correlation Between Gmo High and Balanced Fund

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

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

Diversification Opportunities for Gmo High and Balanced Fund

0.99

Correlation Coefficient

Gmo High  Balanced Fund

No risk reduction

The 3 months correlation between Gmo and Balanced is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Balanced Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Instit and Gmo High 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 High Yield are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Instit has no effect on the direction of Gmo High i.e., Gmo High and Balanced Fund go up and down completely randomly.

Pair Corralation between Gmo High and Balanced Fund

Assuming the 90 days horizon Gmo High is expected to generate 1.86 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Gmo High Yield is 2.37 times less risky than Balanced Fund. It trades about 0.31 of its potential returns per unit of risk. Balanced Fund Institutional is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,235  in Balanced Fund Institutional on May 9, 2025 and sell it today you would earn a total of  90.00  from holding Balanced Fund Institutional or generate 7.29% return on investment over 90 days.

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

Gmo High Yield  vs.  Balanced Fund Institutional

Gmo High Yield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo High Yield are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Gmo High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balanced Fund Instit

Risk-Adjusted Performance

Solid

Over the last 90 days Balanced Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Balanced Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Gmo High and Balanced Fund

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

The idea behind Gmo High Yield and Balanced Fund Institutional 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.