Correlation Between Gmo International and Largecap Growth

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

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

Diversification Opportunities for Gmo International and Largecap Growth

0.92

Correlation Coefficient

Gmo International  Largecap Growth

Almost no diversification

The 3 months correlation between Gmo and Largecap is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Gmo International Equity and Largecap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Growth and Gmo International 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 International Equity are associated (or correlated) with Largecap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Growth has no effect on the direction of Gmo International i.e., Gmo International and Largecap Growth go up and down completely randomly.

Pair Corralation between Gmo International and Largecap Growth

Assuming the 90 days horizon Gmo International is expected to generate 2.63 times less return on investment than Largecap Growth. But when comparing it to its historical volatility, Gmo International Equity is 1.09 times less risky than Largecap Growth. It trades about 0.11 of its potential returns per unit of risk. Largecap Growth Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,184  in Largecap Growth Fund on May 6, 2025 and sell it today you would earn a total of  177.00  from holding Largecap Growth Fund or generate 14.95% return on investment over 90 days.

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

Gmo International Equity  vs.  Largecap Growth Fund

Gmo International Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo International Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gmo International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Largecap Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Growth Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Largecap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gmo International and Largecap Growth

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

The idea behind Gmo International Equity and Largecap Growth Fund 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.