Correlation Between Gmo High and Gmo International

Can any of the company-specific risk be diversified away by investing in both Gmo High and Gmo International 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 Gmo International 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 Gmo International Opportunistic, you can compare the effects of market volatilities on Gmo High and Gmo International 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 Gmo International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Gmo International.

Diversification Opportunities for Gmo High and Gmo International

0.47

Correlation Coefficient

Gmo High  Gmo International

Very weak diversification

The 3 months correlation between Gmo and Gmo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Gmo International Opportunisti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo International 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 Gmo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo International has no effect on the direction of Gmo High i.e., Gmo High and Gmo International go up and down completely randomly.

Pair Corralation between Gmo High and Gmo International

Assuming the 90 days horizon Gmo High is expected to generate 37.28 times less return on investment than Gmo International. But when comparing it to its historical volatility, Gmo High Yield is 3.52 times less risky than Gmo International. It trades about 0.01 of its potential returns per unit of risk. Gmo International Opportunistic is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,435  in Gmo International Opportunistic on January 28, 2025 and sell it today you would earn a total of  153.00  from holding Gmo International Opportunistic or generate 10.66% return on investment over 90 days.

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

Gmo High Yield  vs.  Gmo International Opportunisti

Gmo High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gmo High Yield has generated negative risk-adjusted returns adding no value to fund investors. 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.

Gmo International

Risk-Adjusted Performance

OK

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

Pair Trading with Gmo High and Gmo International

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

The idea behind Gmo High Yield and Gmo International Opportunistic 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.