Correlation Between Gmo Emerging and Value Fund

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

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

Diversification Opportunities for Gmo Emerging and Value Fund

0.68

Correlation Coefficient

Gmo Emerging  Value Fund

Poor diversification

The 3 months correlation between Gmo and Value is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Emerging Markets and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I and Gmo Emerging 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 Emerging Markets are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of Gmo Emerging i.e., Gmo Emerging and Value Fund go up and down completely randomly.

Pair Corralation between Gmo Emerging and Value Fund

Assuming the 90 days horizon Gmo Emerging Markets is expected to generate 1.16 times more return on investment than Value Fund. However, Gmo Emerging is 1.16 times more volatile than Value Fund I. It trades about 0.1 of its potential returns per unit of risk. Value Fund I is currently generating about 0.11 per unit of risk. If you would invest  1,331  in Gmo Emerging Markets on July 1, 2025 and sell it today you would earn a total of  57.00  from holding Gmo Emerging Markets or generate 4.28% return on investment over 90 days.

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

Gmo Emerging Markets  vs.  Value Fund I

Gmo Emerging Markets

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Fund I

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund I are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Value Fund 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 Emerging and Value Fund

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

The idea behind Gmo Emerging Markets and Value Fund I 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.