Correlation Between Gmo High and Intermediate-term

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

Diversification Opportunities for Gmo High and Intermediate-term

0.7

Correlation Coefficient

Gmo High  Intermediate-term

Poor diversification

The 3 months correlation between Gmo and Intermediate-term is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Gmo High i.e., Gmo High and Intermediate-term go up and down completely randomly.

Pair Corralation between Gmo High and Intermediate-term

Assuming the 90 days horizon Gmo High is expected to generate 1.35 times less return on investment than Intermediate-term. In addition to that, Gmo High is 1.29 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.25 of its total potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.43 per unit of volatility. If you would invest  1,046  in Intermediate Term Tax Free Bond on July 31, 2025 and sell it today you would earn a total of  38.00  from holding Intermediate Term Tax Free Bond or generate 3.63% return on investment over 90 days.

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

Gmo High Yield  vs.  Intermediate Term Tax Free Bon

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 19 (%) 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.

Intermediate Term Tax

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Tax Free Bond are ranked lower than 33 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Intermediate-term 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 Intermediate-term

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

The idea behind Gmo High Yield and Intermediate Term Tax Free Bond 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.