Correlation Between Gmo High and Real Assets

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

Diversification Opportunities for Gmo High and Real Assets

0.94

Correlation Coefficient

Gmo High  Real Assets

Almost no diversification

The 3 months correlation between Gmo and Real is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio 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 Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Gmo High i.e., Gmo High and Real Assets go up and down completely randomly.

Pair Corralation between Gmo High and Real Assets

Assuming the 90 days horizon Gmo High is expected to generate 1.03 times less return on investment than Real Assets. But when comparing it to its historical volatility, Gmo High Yield is 1.81 times less risky than Real Assets. It trades about 0.29 of its potential returns per unit of risk. Real Assets Portfolio is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,062  in Real Assets Portfolio on May 20, 2025 and sell it today you would earn a total of  28.00  from holding Real Assets Portfolio or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	87.1%
Values	Daily Returns

Gmo High Yield  vs.  Real Assets Portfolio

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 22 (%) 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.

Real Assets Portfolio

Risk-Adjusted Performance

Good

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Real Assets 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 High and Real Assets

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

The idea behind Gmo High Yield and Real Assets Portfolio 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.