Correlation Between Gmo Resources and State Street

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

By analyzing existing cross correlation between Gmo Resources and State Street Core, you can compare the effects of market volatilities on Gmo Resources and State Street 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 Resources with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Resources and State Street.

Diversification Opportunities for Gmo Resources and State Street

0.94

Correlation Coefficient

Gmo Resources  State Street

Almost no diversification

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

Pair Corralation between Gmo Resources and State Street

Assuming the 90 days horizon Gmo Resources is expected to generate 1.91 times more return on investment than State Street. However, Gmo Resources is 1.91 times more volatile than State Street Core. It trades about 0.19 of its potential returns per unit of risk. State Street Core is currently generating about 0.28 per unit of risk. If you would invest  1,569  in Gmo Resources on May 5, 2025 and sell it today you would earn a total of  290.00  from holding Gmo Resources or generate 18.48% return on investment over 90 days.

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

Gmo Resources  vs.  State Street Core

Gmo Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Resources are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gmo Resources showed solid returns over the last few months and may actually be approaching a breakup point.

State Street Core

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Core are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gmo Resources and State Street

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

The idea behind Gmo Resources and State Street Core 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.