Correlation Between Gmo Usonian and Gmo Equity

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

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

Diversification Opportunities for Gmo Usonian and Gmo Equity

0.88

Correlation Coefficient

Gmo Usonian  Gmo Equity

Very poor diversification

The 3 months correlation between Gmo and Gmo is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Usonian Japan Value and Gmo Equity Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Equity Allocation and Gmo Usonian 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 Usonian Japan Value are associated (or correlated) with Gmo Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Equity Allocation has no effect on the direction of Gmo Usonian i.e., Gmo Usonian and Gmo Equity go up and down completely randomly.

Pair Corralation between Gmo Usonian and Gmo Equity

Assuming the 90 days horizon Gmo Usonian is expected to generate 1.2 times less return on investment than Gmo Equity. In addition to that, Gmo Usonian is 1.23 times more volatile than Gmo Equity Allocation. It trades about 0.15 of its total potential returns per unit of risk. Gmo Equity Allocation is currently generating about 0.22 per unit of volatility. If you would invest  1,209  in Gmo Equity Allocation on May 6, 2025 and sell it today you would earn a total of  129.00  from holding Gmo Equity Allocation or generate 10.67% return on investment over 90 days.

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

Gmo Usonian Japan Value  vs.  Gmo Equity Allocation

Gmo Usonian Japan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Usonian Japan Value are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Gmo Usonian may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Gmo Equity Allocation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Equity Allocation are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Gmo Equity may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Gmo Usonian and Gmo Equity

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

The idea behind Gmo Usonian Japan Value and Gmo Equity Allocation 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.